BRUSSELS -- Any flickering hopes for a fourth-quarter rally in European car and truck sales dwindled as November began.

Industry forecasters now expect 1995 sales will come in no higher than 11.9 million units, far below the 12.5 million predicted earlier this year. Perhaps a tad singed, the experts are basically bearish about 1996 prospects. Best guess at this point: A 4% climb from 1995's lower-than-anticipated level, but far below the 10% to 12% growth rates that followed recessions during the 1980s.

Forecasts of 4% growth in 1995 made year ago were considered guarded as Europe put the cap on a 5.3% year-on-year growth vs. 1993. Even the most reserved projections saw Europe generating more than 12.2 million sales this year.

But consumer confidence in key European markets including the United Kingdom, France, Italy and Spain never materialized. Slow-sinking performances in these markets came despite incentive programs in France and Spain, and a strong expectation for an Italian market recovery.

As a result, European '95 sales will barely move -- up 0.5% over 1994 -- says Arthur Maher, an analyst with DRI/ London.

What happens in Germany will tell the story. "The core European market is Germany. The country has been in a severe recession since 1993, and the last six months have shown improvement. It is emerging from a recession, and the consensus is that 1996 should be a banner year for the consumers," says Mr. Maher.

Through 1995, Germany proved to be the European market exception, posting a 3.5% increase in sales volume.

But some analysts believe the results are gilded, and below the surface the news is far more daunting. German manufacturers spent the first half of 1995 behind the supply eight-ball, enduring labor shutdowns and slow rampups on key new models. To compensate, most vehicle lines went full tilt during the second half after IG Metall, Germany's largest labor union, signed contracts and its people went back to work.

The production deluge flooded Germany's market with new vehicles, forcing most manufacturers to offer generous incentive programs. The backlash for 1996 may haunt the German market if automakers lop off incentives too quickly.

"The German market was pushed quite aggressively, but it still is performing well through the fourth quarter," says Mr. Maher. "So if automakers can reposition sales through incentives, they should continue to use them until they see an appreciable rebound."

In France, government-sponsored incentive programs are back after they were discontinued in June. Vehicle sales suffered after the program first ended, and France posted only a meek 0.5% gain through October, despite six months of incentives. The revived incentive plan is not expected to impact vehicle sales until early 1996.

In Spain, the government failed to revive incentives quickly, so vehicle sales there went screaming into a tail-spin with year-on-year monthly sales volume dropping 20.7% in July, 19.8% in August and 21.7% in September. Overall, the Spanish market was down 7.5% through 10 months, and few end-of-year projections see anything better than an 8% loss for the year.

Despite the gloom-and-doom numbers for 1995, European automakers have put on something of a relaxed, if not happy, face. The last European recession that ripped apart the industry may have imparted some valuable lessons because automakers have spent the last few years trimming costs, organizing labor and moving investments to alternate markets.

Volkswagen AG posted strong third-quarter results, despite a shutdown in Germany during talks with IG Metall. New investment from the Wolfsburg-based company is headed outside Germany to far-flung emerging markets including Brazil, China and Poland.

And while most industry watchers describe VW's current labor contract as a significant albatross, VW did win a flexible work-week, enabling it to tailor total labor time to swings in vehicle demand.

Mercedes-Benz AG also is stepping up production and investment outside of Germany, including its all-activity-vehicle (AAV) plant in Alabama.

Mercedes streamlined its operations in Germany first, however, and officials cite major cost gains through 1994 and 1995.

But the Cinderella story goes to Fiat Auto Spa Chairman Paolo Cantarella and his bold charge into Europe's main vehicle segments. First, success with the company's Punto rallied sales, followed with an assault by the Alfa Romeo 155, Lancia Kappa and now the Bravo and Brava paternal C-class twins. Still on deck is Fiat's 178 world car to be produced in Brazil, Turkey, Poland and likely Mexico.

These investments in emerging markets outside Europe are expected to insulate European vehicle manufacturers from the chilling forecasts made for 1996. South America currently is en vogue, with several billion dollars earmarked for production facilities there. That includes $1 billion invested by Renault SA for a plant in Brazil and $600 million invested by Fiat in Argentina. Mercedes also has announced it will produce its new A-class model both in Germany and in Brazil.

"I'd say the industry is trying to cope with cyclical swings," says Mr. Maher. "The ingredients have been laid, making them less vulnerable in Europe, but not all of the ingredients are there yet. So if we do have an unexpected collapse, it would significantly affect them."