Forecast: Auto

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Susan Jacobs, president of auto consultancy Jacobs & Associates, projects the auto industry's second half will be weaker than the first due to the sluggish economy. She said a turnaround could arrive late this year or early next and would spur sales. But for now, " the fundamentals are not firm."

The difference between this recovery and the last in the early '90s is both vehicle sales and ad spending fell dramatically then. "We haven't seen a big deep cut in consumer spending this time around," said Josh Peters, auto analyst at Morningstar.

General Motors Corp., which last week brought back 0% finance deals, is profitable now and driving its two other Detroit competitors to increase incentives. "GM is really guiding the market, and dropping prices is a very effective way to spur sales," Ms. Jacobs said. Ford Motor Co. has already predicted it will break even this year, after a $5 billion loss globally in 2001, and Chrysler Group showed an operating profit in the first quarter, its first since the 2000 third quarter.

The carmakers will need to advertise incentives, but they should also be doing brand messages, said Maryann Keller, former president of's auto unit. Now that buyers expect rebates, it will take the industry a long time to wean itself off the deals.

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