I like Volvo. As a company it seems to have an honesty and integrity that is rare in this or any other industry. When Volvo talks safety, it’s not because it has identified a brand value that will sell cars. It’s because it really cares about safety. At the Spanish press launch of the new S40, the frontispiece chosen to illustrate the model was a car that had been smashed to bits after a 35mph argument with a brick wall.

And Volvo, for all its safety consciousness, is also slightly and charmingly unhinged. At launches, most manufacturers drone on about camshafts and viscous couplings: Volvo talks about electric razors and toasters (of which more later).

In fact my only problem with Volvo is that I have frequently disliked the cars it builds.

Its ranges have improved year on year but even now the S80 and C70 are, at best, also-rans, the S60 is good but no match for a BMW 3-series, and the outgoing S40 cannot go too soon. Which just leaves the V70, a pleasant and effective estate and the excellent XC90 off-roader as the best of the bunch.

So it seems certain that the new S40 and its forthcoming V50 estate brother will provide Volvo with unprecedented ability across its ranges. Until now Volvo has been almost as hopeless at building small cars as Alfa Romeo has been at building large ones. Remember the Volvo 340? Well this attractive saloon is its direct descendant.

Based on the same platform as next year’s Ford Focus (and this year’s C-Max and Mazda3), the S40 is billed as a premium executive saloon for people who don’t need a big car. Both physically and conceptually, it’s an attractive proposition. As a saloon it has no real rivals — save perhaps the Alfa 156 — but its real opposition is the likes of the BMW Compact and the Audi A3.

Sales begin in February with the 220bhp T5 flagship, a 170bhp 2.4i and a 136bhp 2 litre diesel. The reason it’s being launched from the top down is that the old S40, soon to be ludicrously dubbed the S40 Classic, stays in production until the summer. Only after it is confirmed dead will the volume sellers, a 1.8 litre 125bhp petrol version and, later still, 1.6 petrol and diesel models come on stream.

Prices have been announced for all models from the 1.8 upwards and span a range from £16,000 for a basic 1.8 to £23,750 for a T5.

Volvo is rightly proud of the car’s cabin. Your eyes are drawn to the tall, slim “floating” centre console — inspired by the aforementioned razor — which houses all the controls for the stereo, heater and so on. It is floating in that it is only about half an inch thick, with clear space behind it. Toaster hunters should direct their gaze to the air vents.

The driving environment is cool and classy and the quality of the cabin every bit as good as the increasingly shabby standards of lower-order Mercedes and BMWs. Only Audi can still credibly claim to be a cut above this average.

Though it is a Ford under the skin, Volvo’s engineers have been given free rein to tune the car to their requirements and it certainly drives more like a Volvo than a Ford.

This is not the good news it may at first seem. The ride quality is beyond serious criticism but the terrific steering and chassis precision that has distinguished so many Fords of the past decade has been lost, suggesting that Volvo remains more interested in how cars look than how they drive.

Just two versions, both with five-cylinder engines, were available at the launch: the T5 with a 0-62mph capability of 6.8sec and a 150mph top speed and the rather more sedate 2.4i (£18,500), which records 8.2sec and 138mph respectively. Sadly, neither is much fun to drive.

With a standard six-speed transmission, the turbocharged T5 sounds good and offers competitive performance, but lacks the handling fluency of a BMW and fails to establish itself as a convincing performance saloon. For the money the 2.4i is convincingly the better car, not least because its softer springs serve up a ride quality that is close to the best in its class.

Volvo’s bosses should not be too vexed by this. Their brand has moved many miles from its former armoured personnel carrier image, but nobody expects sports cars of them as yet.

The S40’s static qualities are more appealing by far and the car seems set to be well equipped and good value when it goes on sale. Just don’t mistake it for a family car unless that family — parents included — is rather small. This S40 is even shorter than its predecessor and rear legroom is tight to say the least. However, the boot is large and sensibly shaped.

Volvo is aware of how difficult this market is to crack — people don’t desert BMW for the hell of it — which is why it is claiming most customers will be those currently driving Vectras and Mondeos who want the kudos of a flash badge and don’t need the room. Given that mainstream cars are in decline and so-called premium brands are booming, there is much sense in this.

I expect the smaller engine S40s with less lofty aspirations and price tags will prove the pick of the bunch. The T5 will find the going hard against the Audi A3 3.2 and BMW 325i Compact but I can quite see the diesels and 1.8 petrol versions converting Mondeo men by the thousand. On looks and quality alone, it’s going to be a steal at £16,000.

VITAL STATISTICS

Model: Volvo S40 T5 SE
Engine type: Five-cylinder turbo, 2521cc
Power/Torque: 220bhp at 5000rpm/236 lb ft at 1500rpm
Transmission: Six-speed manual
Fuel/CO2: 32.4mpg (combined)/208g/km
Acceleration: 0 to 62mph: 6.8sec
Top speed: 150mph
Price: £23,750
Verdict: The first good small Volvo