The general aviation and small aircraft industry nearly went down in flames last year. By every statistical measurement, the nose-dive was one of the steepest in the industry's history, but a casual visitor to its factories might never know it.

At the Cessna Aircraft Co., workers bathed in the eerie yellowish glow of the lights in a vast new plant are assembling the first production models of the Citation III, a high-flying business jet that is the new top of the Cessna line. The first Citation III has yet to be delivered to a customer, but production is sold out through 1985.

In a Cessna hangar, technicians are fitting out another new plane for which the company has high hopes, the Caravan, a bulky single-engine, rough-duty turboprop that can carry 3,000 pounds of cargo or 14 passengers. The Caravan is scheduled for full production in 1985.

Across town, in a cluttered hangar at the Beech Aircraft division of Raytheon, engineers are testing a prototype of the Lightning, a single-engine turboprop that will start going out to customers two years from now.

Stimulated by advance orders for the six-seat Lightning and by signs of rising demand for its older models, Beech has announced plans to recall up to 700 assembly-line workers, recruit 200 engineers, build a new corporate headquarters here and extend its test runway to 7,000 feet.

Bangor Punta Corp.'s Piper division, which had dropped four models from its lineup because nobody was ordering them, startled the industry late last year by unveiling four new models, including a luxury-class, pressurized, single-engine piston plane called the Malibu and a turboprop capable of flying at 400 mph. Piper also opened a new plant in Vero Beach, Fla.

Before these investments begin to return any dividends, however, the industry has to recover from 1982 and survive a 1983 that looks little better. According to company executives and Wall Street analysts, these demonstrations of long-term optimism by the biggest makers of business and personal airplanes assume a gradual revival of their depressed market but not an early turnaround.

"It was a tough year, and 1983 is going to be rough, too," says Edward W. Stimpson, president of the General Aviation Manufacturers Assocation (GAMA). "But we are preparing for the future."

Manufacturers of corporate and personal airplanes are "very cautious about ordering the production of planes for inventory," said Eliot Fried, an analyst with Shearson/American Express, "but with interest rates down, it's time to resume production."

The general aviation industry has come a long way from goggle-and-scarf days, and is going through a period of remarkable advances in technology and improvement in aircraft capabilities. From single-engine, two-seat piston planes to 19-seat, turbine-powered commuters, the aircraft are faster, roomier and more comfortable than ever. Even small single-engine planes can now be equipped with weather radar, electronic navigation equipment and pressurized cabins. But last year was calamitous for the entire industry, for reasons not hard to understand.

Recession-hit corporations, plagued by declining profits, stopped ordering airplanes and canceled some orders. Ranchers and oil-well drillers, who have been good customers for light planes, retrenched as earnings declined. High interest rates drove up financing costs. Foreign markets deteriorated as other nations developed more of their own planes, the strength of the dollar made the cost of U.S. products prohibitive and the value of the Mexican peso collapsed.

The results were reflected in grim statistics. The 11 U.S. manufacturers of business aircraft shipped 4,244 planes to buyers last year, less than half the 9,457 shipped in 1981 and less than a quarter of the number shipped in the peak year 1978. Factory billings plummeted from $2.92 billion in 1981 to $2 billion last year. For 1983, GAMA is projecting a slight increase in unit deliveries, but very little rise in billing revenue.

The three largest manufacturers, Cessna, Piper and Beech, which have 87 percent of the market, laid off thousands of production workers. Beech began 1982 with 10,700 employes and ended it with 7,750; Cessna's work force at its main plants here dropped from 12,000 to 5,100; Piper declined from 4,500 to 2,700.

Cessna, the only major general aviation manufacturer that reports earnings as an independent company, lost money in the quarter that ended Sept. 30, but returned to profitability in the quarter ended Dec. 31, reporting net income of $1.8 million, or 10 cents a share, on revenues of $149.4 million. In the same quarter of 1981, Cessna earned $15 million, or 78 cents a share, on revenues of $281.3 million.

In the face of this avalanche of bad news, industry executives seem convinced that things have to get better eventually. This is not, by all accounts, one of the terminally ill industries where a permanent contraction is inevitable.

"It will be a long, slow climb back," says Charles W. Dieker, Beech's senior vice president and treasurer, "but we do anticipate that sales will pick up in spring and summer. Last summer, order cancelations exceeded new orders. Now we have strong order activity."

Cessna has enough orders for the Citation III, which sells for about $6 million, that it is already assured of recouping its $250 million investment in the plane within the first year of sales, according to Chairman Russell W. Meyer Jr.

"We expect to deliver about 30 this calendar year, and by the end of the year we will be delivering five or six a month, many to major corporations that want them for convenience," he says.

That "convenience" is one of the principal arguments used by general aviation industry executives to promote their products to corporate officers.

"We actually have a ready-made market," GAMA's Stimpson says. "Look at the airline schedules, the inconvenience and cost of moving people around. You can put two or three people on your own plane, send them when and where you want, and actually save money. Decentralization of industry to the boondocks and smaller towns, while the major airlines are concentrating on large hub cities, creates a demand for feeder service."

The growth of small commuter airlines linking small cities with the major hubs serviced by the commercial airlines has spurred the development of new propeller-driven passenger planes, such as Beech's 1900, a turboprop that carries 19 passengers. Beech President Linden Blue said there is "every indication" that the 1900, which costs $2.5 million, "is going to become the 727 of the commuter industry."

(If a commuter plane carries more than 19 passengers, its crew must--under federal rules--include a cabin attendant.)

Fairchild Swearingen is the only U.S. producer of these larger commuter planes, and it has been struggling to maintain its share of a market increasingly dominated by foreign manufacturers. The U.S. International Trade Commission recently rejected a request by Fairchild for restrictions on imports from Brazil, which Fairchild said were unfairly subsidized by the Brazilian government.

Fairchild is not alone in battling foreign competition. Cessna, Gates Learjet and Gulfstream American Co., which rely heavily on sales of executive jets, are encountering stiff competition from planes made in Canada, Israel, Britain, France and Japan.

Cessna's Meyer said he was especially upset about the new Japanese entry, the Mitsubishi Diamond, which is being heavily advertised as an "efficient business tool" for corporations.

"When times are tough, as they are now, it really hurts to lose a sale to the Japanese," Meyer said, "because under their rules we can't sell over there. The good news is that it's an awful plane." He says he flew the Diamond because Mitsubishi had specifically targeted Cessna's Citation customers, and he pronounces it "the worst plane I've flown in years. It's totally noncompetitive in every area."

Despite his concern about the Diamond, Meyer offered Cessna stockholders an optimistic long-term forecast for his company and for the general aviation industry.

"It is unlikely," he said in Cessna's 1982 annual report, "that total unit volume will return to the 17,000 level of the late '70s. While unit sales will probably be lower, dollar volume should increase steadily because of a greater demand for higher-performing piston- and turbine-powered aircraft." Total billings, he said, should rise from the $2 billion level of 1982 to more than $6 billion by 1985 and at least $12 billion by 1990.