No surprise: August's 21 percent auto sales drop, to the lowest level for the month in nearly 30 years, was dismal.

Last month's numbers were dragged down by comparison with August 2009, when sales soared because of cash for clunkers. And because inventories are low, carmakers didn't need to offer blockbuster incentives to clear dealer lots for the incoming 2011 models.

August's seasonally adjusted annualized sales rate dropped below 11 million units for the first time since February, to 10.8 million, according to the Automotive News Data Center.

But most analysts expect sales to return to the low- to mid-11 million range. So IHS Automotive left its fourth-quarter production forecast unchanged at 2.8 million, up 3 percent from a year earlier.

But manufacturer profits? That's a much better story than in years past -- even though sales continue to skid along near the industry's lowest levels in three decades.

The irony: The domestic automakers, which managed to lose billions of dollars when U.S. sales came to 16 million or more a year, now are largely turning a profit at an annual industry sales rate around 11 million.

How are they doing it?

Automakers are benefiting from customers' opening their wallets wider. Consumers are paying higher transaction prices and sometimes buying more vehicle than they were willing to a year ago. Sales of high-margin SUVs, crossovers and pickups are rebounding faster than sales of cars, especially small cars.

In addition, automakers' discipline is paying off. Cutting overhead and curbing overproduction have led to tighter inventories, smaller incentives and higher profit margins.

"It's all these things working in concert," said Jeff Schuster, executive director of global forecasting at J.D. Power and Associates. "It's almost like a symphony coming together, which allows us as an industry to actually be profitable at these lower volumes.

"If this discipline can be maintained, I would argue there's a whole lot of money to be made in this industry at a 15 or 16 million unit level," Schuster said.

Not so crazy

Today's level of profitability varies widely.

Chrysler Group, for instance, posted a net loss in the second quarter, though its operating income was positive, and rising, and its cash flow also was positive. General Motors Co. reported a $1.3 billion net profit in the second quarter. Ford Motor Co. had net income of $2.6 billion.

"If you would have asked me five years ago, could Ford make $2 billion in a quarter, a lot of it in North America, if industry sales volumes were 11 million, I would have thought you were crazy," said George Pipas, Ford's lead sales analyst.

The mix of vehicles is part of the reason for higher profits. Customers are more willing to buy better equipped and bigger vehicles than they were last year, and that means transaction prices are up, said Jesse Toprak, analyst at TrueCar.com.

"Last year was sort of the epicenter of the decline in automotive sales," Toprak said. "So the purchases that we saw were extreme need-based purchases. You bought a car that was going to give you the most amount for the least amount of money."

Cars vs. trucks

Today, crossovers such as the Chevrolet Equinox are selling well and are in short supply. Sales of the Equinox, a popular clunkers choice a year ago, fell 20 percent in August but were up 78 percent for the first eight months of 2010.

Pickups, which usually carry a hefty profit margin, are also doing better. Full-sized pickups are up 16 percent through the first eight months of 2010. The segment's share of the overall market has rebounded to 11.1 percent so far this year, up from the single-digit share it dropped to after gasoline prices began spiking in 2008.

Setting aside August's skewed sales, here are some other hints that bottom lines may be doing better than top-line sales numbers:

-- In the first eight months, the brands with the sharpest sales gains are Buick, Cadillac, GMC, Audi and Infiniti -- all high-end, fatter-margin brands.

-- Through August, sales of SUVs, crossovers and pickups are up 14 percent, while car sales are up 4 percent. Cars still lead light trucks in year-to-date totals. But that lead has narrowed to 479,944 units from 748,428 this time last year.

-- Looking at specific segments, budget cars, such as the Hyundai Accent, are down 30 percent in the first eight months. Luxury cars, led by the Mercedes-Benz E-class, are up 19 percent. Premium crossovers, led by the Lexus RX, are up 31 percent.

Whether overall sales rise sharply or continue to bump along at these levels, the key now to maintaining the profit momentum is sticking to the industry's new model. Even though spikes in incentives are common during the summer sell-down season, this year incentives and inventories have remained relatively stable.

Said Pipas: "This summer, as sales and economic indicators have gone sideways, provided a test to the industry to see if it could maintain the discipline."

So far, so good.