The automotive industry is about to wrap up another very good year, but this is probably as good as it gets. at least for this cycle. Considering that new car and truck sales will reach just over 15 million units, this will wind up being the U.S. industry's best performance since 1988.

Continuing a trend that shows no sign of running out of steam, light trucks will capture a record 43% of the U.S. market for fueled largely by consumers, lust for sport/utility vehicles and full-size pickups.

Chrysler Corp. comes away the biggest winner, garnering slightly more than 16% of the market, the best it has done since the Japanese entered the U.S. Other makers on track to bit their best@ever years here are BMW, Honda (excluding Acura) and Toyota.

Can this wonderfully intoxicating recovery sustain itself?

While the consensus among the Big Three CEOs, as set forth elsewhere in this issue, is for 1997 sales to range between 15 million and 15.5 million again, there is a growing body of evidence suggesting a softening that could keep that at 14.5 million to 15 million.

The factors driving this more cautious outlook include slower economic growth, mounting consumer debt, flattening job creation and income growth and an exhaustion of pent-up demand.

This means we can look for more and bigger incentives as consumers, bargain-hunting instincts get sharper. Brand management is trying to push most manufacturers away from the rebate game, but we shall see when marketing theory meets economic reality.

Indeed, the availability and intensity with which automakers are willing to use incentives will determine to a large extent who wins and loses in the coming year. This does not mean that other variables that shape a consumer's decision will be discarded. Ride and handling, styling and product image are still pivotal. But price will be a more important variable for most consumers than it has been in recent years.

Will General Motors Corp. and its arsenal of new products finally reverse the market share erosion that may take it below 30% of total U.S. light vehicle sales? Can Chrysler continue grabbing market share? In short, it will hinge on their willingness to give up a little profitability, something Wall Street certainly will not encourage.

Chrysler and the larger Japanese manufacturers have the best chance to gain share in 1977. Chrysler's success this year has been driven by a strong portfolio of well-positioned products and a willingness to support them with just enough incentives to lure buyers who have not previously considered a Chrysler product.

Despite - or perhaps because of - its industry-leading $1,955 profit-per-vehicle, Chrysler won't hesitate to turn up the marketing heat and likely will spread its incentives to models that haven't needed them before.

But Toyota, Honda and even Nissan could have the greatest impact on the market in 1997. Not only are they enjoying the fruits of a weaker yen, making the cost of producing parts in Japan and shipping them to the U.S. lower, but they have been even more aggressive than their American competitors in engineering costs out of their new vehicles. The price advantage the Big Three enjoyed when the dollar languished at around 85 yen has disappeared.

At an exchange rate of 110 yen to the dollar, Japanese automakers have an additional $200 in profit margin on an average $20,000 vehicle for every one yen increase in the dollar. This "windfall" can be recorded as profit or passed onto buyers in the form of incentives or lower sticker prices.

Although most Japanese manufacturers don't expect the dollar to remain at 115 [yen], neither do they foresee it falling below 105 [yen]. Within that range, the Japanese collectively should be able to add 1 percentage point to their U.S. market share next year.

Conversely, Ford Motor Co. and GM appear to be the most vulnerable, but don't look for either to lose more than a fraction of their current market share. Ford will continue to grab share in the light truck side, but it won't be enough to compensate for what it loses on the car side.

GM is truly the industry's biggest wild card going into 1997. Even with the launch of 15 new models over calendar 1996 and 1997, the world's largest automaker could continue to shrink in the U.S. unless it can quickly expand and diversify its portfolio of light truck models to be more balanced with its line of car models. At least in the short term, GM's product portfolio is too heavily weighted toward passenger cars, which continue to decline in popularity.