When the smallest SUV in Land Rover’s lineup, the Freelander, went on sale in the U.S. in 2001, it had already been offered in other markets for three years. Land Rover tells us that it took those three years to develop a V-6 engine for the Freelander for the power-hungry American market. But by the time the little Land Rover made its stateside debut, it was already showing signs of being dated. Land Rover’s compact luxury sport-utility didn’t have much of a run in the U.S.; after sales slowed dramatically in 2004, the British truckmaker stopped exporting it. The following year, the MG Rover Group in England closed, and that meant the Freelander’s Rover-built 2.5-liter V-6 and four-cylinder engines went out of production. So Land Rover needed to find a replacement engine for its smallest ute.

The ’08 Freelander, which will drop that name and simply be called the LR2, should debut at the Paris auto show in September. It will be built on the Ford C1 platform (European Focus, Volvo S40) and will have more space and power when it goes on sale in 2007. Thanks to a 5.9-inch-longer wheelbase, interior space increases. Power comes from a version of the new 3.2-liter inline six-cylinder that will be under the hood of the ’07 Volvo S80. In the LR2, the engine is upgraded for off-road use to resist dust, mud, and water. Other improvements allow it to operate on a greater incline without losing oil pressure. The transversely mounted six-cylinder makes 230 horsepower (five less than in Volvo form) and 234 pound-feet of torque (two less than the Volvo version). That’s a strong improvement over the Freelander’s 174-horse total. The twin-cam 24-valve engine has variable valve timing as well as a multistage intake system. Hooked to a six-speed automatic, it will take the LR2 from standstill to 60 mph in 8.4 seconds, claims Land Rover, and on to a 124-mph top speed. The last Freelander we tested, in January 2002, turned 0-to-60 in 10.2 seconds.

Underneath the unibody LR2 is a fully independent strut-type suspension with larger disc brakes at each corner. The LR2 we drove rode well, feeling more nimble and better controlled through turns than a Range Rover or LR3. Compared with a BMW X3’s, the LR2’s ride is softer and more comfortable.

For those venturing off-road, the LR2 has an 8.3-inch ground clearance and an all-wheel-drive system that sends most of the torque to the front wheels until slip is detected and then the electronically controlled center coupling sends power to the rear wheels as needed. The center differential seems to act faster than a traditional viscous coupling. Open differentials are used front and rear, with brake-based traction control that apportions power left or right. As in the larger LR3, Land Rover’s Terrain Response is standard and allows the traction control, the stability control, and the anti-lock brakes to be tailored for different surfaces and situations. Standard roll control that uses a sensor to determine the likelihood of an impending rollover works in conjunction with stability control to keep the LR2’s shiny side up.

Pricing has not yet been announced, but we expect the LR2 to start at about $29,000 for the well-equipped base model that comes with leather seats, automatic headlights and wipers, sunroof, 18-inch wheels, and rear parking sensors. A loaded version with nav, an upgraded stereo with satellite radio, and bixenon headlights should be about $34,000. Look for the LR2 in U.S. showrooms next spring or early summer.