TURNING POINTS in the car industry don’t come more profound than this.

Back in 2009, on the very day General Motors in North America announced that Chapter 11 bankruptcy was finally, inevitably a horrific reality, its Australian outpost bravely and frankly fielded questions from the media about what the future may bring – but only on the proviso that the following day’s Cruze launch would focus solely on the new Holden small car.

Nobody realised it back then but then-MD Mark Reuss’ deal with the media was the beginning of New Holden, and one that would lead – with astonishing speed – GM in Oz away from being just ‘The Commodore Car Company’. The answers to questions about what the future may bring were but one day away.

Fast forward almost two years and the only Australian-built small car – the JH Cruze – is now made alongside the Commodore. The small car competes in a segment that accounts for a quarter of all new vehicle sales in Australia, while the big one is scrapping with the floundering Falcon and Aurion for just 7.8 per cent.

Putting the Mazda3 – and even Volkswagen’s Jetta – on notice, Holden appears to have spent the past two years focussing on making the Cruze a much, much better proposition in its transition from Korea to Adelaide.

Leading the Holden charge, both literally and metaphorically. is the new 1.4 iTi turbo, which you can’t have without the electric power steering system or a Watts link rear suspension.

The new-to-Cruze technologies replace the respective hydraulic and torsion beam systems that continue to live on beneath the slightly altered 1.8L Ecotec and much-improved 2.0D diesel.

The 1.4 iTi transforms the Cruze driving experience. Far from being a sluggish (1.8L auto) or rowdy (old 2.0 diesel) big small car with heaps of space, a brilliant interior, noisy and firm suspension and terminally dull dynamics, the JH with the Austrian-built turbo powerplant now feels and drives like, well, a sort of quasi Volkswagen. Or, in other words, it seems more German than before.

The iTi is quiet and unassuming on start-up, while selecting ‘D’ in the six-speed auto (or first gear in the light and easy - though surprisingly long-throw - six-speed manual and flooring it results in a moment’s hesitation, followed by a smooth take-off that builds up quickly as the revs rise effortlessly past the 6000rpm redline. Just like in a VW Golf 90 TSI.

Aided by the auto shifter’s seamless action, you soon forget about the 1.4-litre bit and marvel instead at the iTi’s sweet, refined punchiness and alarming propensity for speed. Except for a small period of coarseness around the 4000rpm mark, there is little doubt that Holden has a gem of an engine on its hands.

Even with four bods on board, there is enough torque to haul the Cruze along, but be careful when overtaking or if you need to accelerate quickly from standstill, because like the Golf TSI this turbo needs a second to spool up. Hills too can knock the wind out of the iTi unless you’re in the 2000 to 5000rpm power zone.

Underlining this drivetrain’s dynamicism is the Watts link rear-end that really adds a new level of feel, control and stability in fast corners, compared to the regular Cruze – if not a Ford Focus. The back-end does not thump or hop around as much as you slice through a turn, while the steering’s light touch makes easy work of parking and tight turns. And on both 16 and 17-inch wheels, the ride quality is impressive.

However, the Holden’s helm does not feel as interactive as the Mazda3’s, which benefits from sharper and weightier steering, while some rack rattle over rougher edges while cornering was evident. But as the CD 1.4 iTi sedan we drove mostly is not meant to be a hot-hatch-type vehicle, we can forgive that. At least it is fun – and that is far more than what we expected from any Cruze.

A brief stint in the SRi manual and SRi-V auto confirmed the breezy enjoyment and slick refinement the turbo drivetrain provides. This is a Golf-lite experience at a Hyundai i30 price.

The other pleasant surprise is the newly revamped 2.0D diesel. No longer is the Cruze Diesel a prickly and raucous experience, since the concerted sound-deadening efforts of engineers carried out across the entire JH range is most evident here.

Power delivery is instantaneous, after a slight hesitation (turbos will do that), and muscular over a wide range of revs, but without the noise and harshness of before. As with the 1.4 iTi, this drivetrain seems to have caught up with the better European ones (though the diesel comes from Korea), providing performance and parsimony in an appealingly slick package. The auto, too, seems like a good fit.

It is a shame, then, that the 2.0D can’t be had with the Watts link rear-end, for the previous Cruze’s slightly fidgety ways is as obvious as ever when stepping out of the more planted 1.4 iTi. At least the hydraulic steering feels somewhat more natural than the EPS.

We asked some Holden engineers to nominate their favourite JH drivetrain, and a couple preferred the diesel despite the less complex suspension, because of the engine’s sophistication. Note though that no manual Cruze 2.0D was available for us to sample. That benefits from a new six-speed manual.

Finally we had a brief drive of the 1.8L Ecotec auto – the engine that accounts for about 80 per cent of all outgoing Cruze sales, and that model’s weakest link.

Holden worked hard on recalibrating the final drive ratio, reducing noise/vibration/harshness pathways, revising the automatic gearbox’s interaction with this engine, and altering the pedal map electronics.

But the 1.8 Ecotec remains a middling effort at best, never rising above being merely sufficient in power or refinement. Most rival engines feel gutsier yet quieter.

It is essential that potential Cruze buyers drive this after having a go in the 1.4 iTi, if only to see why the latter’s $1250 premium is one of the small car market’s true bargain options. The spark and verve of the turbo alone should be enough to sway them towards the blower.

Our re-familiarisation with the Cruze on the JH launch highlighted how spacious a so-called small car this Holden really is – it exceeds a VB Commodore in all dimensions except for overall length.

Few cars at this price-point have an interior presentation as appealing, functional or comfortable as the Cruze’s. From the smart fabric detailing on the dash of the base CD to the choc-a-bloc luxury-car accoutrements of the SRi-V, this Holden is heaving with showroom appeal. And it has the space and ambience of a mid-sized sedan.

Being an Aussie-built car, we hoped nothing would fall off or break, and other than a ‘zizzing’ noise from the driver’s side B-pillar, the JH felt tight and well screwed together.

So where does the latest Holden small car stand in an overcrowded small-car marketplace?

Sadly, the 1.8 Ecotec – while undoubtedly improved – is still off the pace unless you are particularly undemanding about performance and dynamics. This Cruze still feels undernourished, with thumpy rear suspension and a rattly steering column, except now it feels like you are wearing some cheap earmuffs to block some of that out.

Happily the news gets much better from here on in.

Keener drivers will still prefer a Focus, Mazda3 or Golf, and badge snobs will certainly choose the latter as well, but any potential four-cylinder sedan buyer with up to $30,000 to spend ought to drive the 1.4 iTi or 2.0D models. At least one of these powerplants is sure to please.

With its international flavour, the Cruze feels neither American, Asian nor European, but with the iTi and 2.0D drivetrains and Commodore colours coming through it now seems to have adopted a slight German accent combined with an Aussie twang. So we can see how somebody wanting a VW but without the hefty premium might be swayed.

What we are trying to say is that Holden now offers two very different Australian-made family cars in the Cruze and Commodore that can basically do the same thing for very different buyers living in a very diverse country

While one has the size and performance to appeal to the traditional customer base, the other – especially in 1.4 iTi guise – seems to have what it takes to fit right into this new, post-GFC world of downsizing and smarter thinking.

And if having a front-wheel drive four-cylinder five-seat sedan (or hatch) means that Holden can stay in business making vehicles like the Commodore, then it seems that GM took the correct turn in Australia at that critical point back in 2009.