CHICAGO — Moody’s Investors Service this week revised its outlook to negative from stable on Michigan’s general obligation debt, warning that the state faces a fundamental economic weakening stemming from deterioration in the U.S. auto industry.

The revision comes as Michigan prepares to enter the market next week with $468 million of GO bonds.

Moody’s maintains an Aa3 rating on the state’s roughly $1.48 billion of outstanding GO debt. The negative outlook also applies to $3.6 billion of state lease-backed debt.

Standard & Poor’s assigns a AA-minus rating with a stable outlook to the state’s debt. Fitch Ratings rates the state AA-minus with a negative outlook.

Credit analysts have praised the state for its ability to manage its nearly decade-long economic slide, but Moody’s this week said Michigan is now facing a fundamental shift in its economy. Chief among its challenges is job losses stemming from the declining auto industry. Other problems include a steep drops in revenue and likely depletion of budget reserves.

Michigan’s unemployment rate reached 12% in February, the highest in the nation.

The state’s Aa3 rating is supported in the near term by current federal support for the state and for the automobile makers, said Moody’s analyst Ted Hampton. Over the long term, the rating is supported by the state’s ability to manage fiscal stress — a skill picked up as Michigan has grappled with high job losses and a weak economy long before most other states.

But a number of factors could lead to a cut in the state’s Aa3 rating, warned Moody’s. Among the pressures: a decline in fund balances, the use of one-time measures to balance the budget, increased liquidity pressure, and continued revenue declines.

Gov. Jennifer Granholm called the recent revenue declines “breathtaking” at a recent press conference. In January and February, revenues came in $200 million below projections made in the beginning of January, according to state fiscal officials.

Michigan will hold its next revenue-estimating conference in May. Hampton praised the state for its generally conservative revenue estimates.

The state’s credit has been helped somewhat by a recent increase in fund balances due to a number of new revenue measures, including two tax increases implemented in late 2007. Lawmakers are currently debating whether to repeal one of those increases, an unpopular new surcharge on the Michigan business tax.

Michigan next week is expected to sell four series of taxable and tax-exempt GO bonds. Most of the debt will refund variable-rate debt into a fixed-rate mode, while about 25% of the borrowing is new money that will finance the state’s school loan and environmental programs.

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