NEW YORK (CNN/Money) - The first quarter wasn't a particularly good one for the U.S. auto industry. But it's expected to be as good as it gets as far as 2003 profits are concerned.

Industrywide U.S. sales were off 3.2 percent from the first quarter of 2002, as General Motors Corp. (GM: Research, Estimates) and Chrysler Group saw their market share slip from year-earlier levels. Ford Motor Co. (F: Research, Estimates) made some market share gains on the other members of the Big Three as well as the imports, but it still saw its sales decline from a year earlier.

But when GM and Ford report first-quarter earnings this week, they will be posting what analysts believe will be their best results of 2003. The second quarter, typically the strongest quarter due to the spring selling season, is expected to see earnings fall not only from year-earlier levels but from first-quarter results as well. That, even as the No. 1 and 2 automakers are both projecting very strong April sales.

Analysts surveyed by earnings tracker First Call forecast that GM earnings per share will be up to $1.55 in the first quarter from $1.29 a year earlier. But second-quarter EPS is expected to fall to $1.37 from $2.53 a year ago. For the year, EPS is forecast to fall to $4.63 from $6.64 in 2002.

Ford earnings are expected to follow a similar road. The No. 2 automaker lost money on its core auto operations last year, but ended up in the black due to its credit and rental car units. It is expected to post first-quarter EPS of 22 cents, compared with a 6-cent-a-share loss a year earlier. But second-quarter EPS is forecast to fall to 13 cents from 31 cents a year ago.

Chrysler Group parent DaimlerChrysler AG (DCX: Research, Estimates) is expected to show stronger quarters the rest of the year; even so, analysts are expecting the second and third quarters to be below year-earlier results.

Expensive new financing packages are responsible for both the expected jump in sales and thinner profit margins. GM is offering zero interest financing for up to five years on virtually all of its 2003 vehicles. Ford and others have matched that for most of their vehicles as well, with Ford throwing in a $5 a day lease rate on two popular models - the Mustang and Ranger.

"I think incentives have been a concern for some time now as they impact margins," said Bob Schnorbus, chief economist for J.D. Power & Associates. "With GM pushing hard on incentives to boost their volume, it's pulling everyone kicking and screaming into the game whether they like it or not."

Schnorbus said his firm still expects a healthy 16.4 million cars and light trucks to be sold in the United States this year, even though the annual sales rate in the first quarter was a somewhat disappointing 15.9 million. Ford and GM execs spoke at the beginning of the month of how they expected April sales to approach or surpass an annual sales rate of 17 million vehicles.

"If we get a big kick start to the quarter with a strong April, that could offset us being a bit weaker than we expected to be in the first quarter," said Schnorbus.

But there is also a question about whether the incentive-induced sales spike would be simply taking sales away from later months by prompting buyers to move up purchases planned for later in the year. GM's 9 percent decline in first-quarter sales followed an exceptionally strong December sales month, when a marketing push raised sales 36 percent from year-earlier levels and added 5 percentage points to its market share.

If the industry does have 16.4 million in U.S. sales this year, it would be the sixth-best year in the industry's history. But it would also mark the third straight year of lower sales after the record 17.4 million sales in 2000.

"I wouldn't yet rule out the chance we could be as good as last year," said Schnorbus. "It depends on how things turn around now that the uncertainties of the war have played out and how aggressive the automakers continue to be through rest of the year."

But if those sales come with still stronger incentives, the profits are likely to continue to sink even with the relatively strong sales.