Holy moly.

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More detail has emerged concerning Saab's plan to introduce a smaller model based on the Subaru Impreza. Prototypes are already under evaluation, based on the five-door version of the current Impreza. Examples of the Subaru have been remodelled with Saab front-end styling and a redesigned tail for management assessment. Here, we've doctored a picture of the current Impreza and 9-3 to give a hint at what the new car may look like. Top and tailling apart, the car is said to look remarkably similar to the Impreza, with many panels, including the doors and roof, left unchanged. No go-ahead has been given for the project, but if it does get the green light, the new Saab, probably to be known as the 9-1, would go on sale sometime in 2004.

The tie-up with Subaru is possible because the Japanese company is part-owned by Saab's owners General Motors. Subaru's management would have to give the project their blessing since GM does not have majority control, but the deal is a potentially profitable one for them - the car would be built in Japan, and would improve the profitability of both the Impreza and Legacy, which share the same platform.

GM is also considering basing a smaller Saab on the next-generation Impreza, although this would mean a longer wait for the new car. However, it would allow Saab to have more significant input into the design, improving its crash performance - a major Saab selling point - and allowing the development of the range of diesel engines that are vital for European sales.

The surprising decision to adapt a Subaru to make a Saab is the result of General Motors' growing impatience with the Swedish company, which continues to lose money and, with annual sales of only 120,000 cars, is nowhere near its 175,000 capacity. It is currently making a fifth of its workforce redundant, and its engineering department is being more closely integrated with GM's Opel operation in a move that many fear may lose the brand its individuality.

Saab had previously considered a smaller car based on GM's Delta platform, which will eventually yield the next Astra, but had rejected it because it was not sufficiently Saab-like. Ironically this is a criticism it will be much easier to level at a Subaru-based model. Saab had also been co-developing an off-roader with GM's Cadillac, a model that would have considerably helped sales in US, but this project has also been abandoned. One of Saab's difficulties is deciding what kind of car its third model range should be. A smaller Saab might do well in Europe but not in the US, one of its major markets, while the reverse would apply to an off-roader.

But at the root of its troubles is GM's failure to invest in the marque on the scale necessary to realise its potential. GM's investment pales before the sums Ford has spent on Jaguar and Fiat on Alfa Romeo, for example. While the creation of a Saab from a Subaru will undoubtedly bring the company its desired third model range, the car in question may ultimately do much to damage the brand.