Porsche was in a significant financial crisis in the early 1980s, with declining interest in its sports cars, particularly in the U.S. The 944, while an evolution of the 924, was showing its age, and sales were falling. Porsche decided to develop a new entry-level model to address this. Shortly after the start of production of the 944S2 variant, engineers began working on significant upgrades. Executives were planning a final "S3" variant of the 944, but 80 percent of the 944’s mechanical components were either significantly modified or completely replaced. Porsche management chose to introduce the variant as a new model, dubbing it the 968. The design work was done by Harm Lagaay, who had previously designed the 924 and 944. Manufacturing was moved from the Audi plant in Neckarsulm to Porsche's own factory in Zuffenhausen to reduce production costs.
The 968 was largely a restyled evolution of the 944. The front of the car resembled the top-of-the-line 928, sharing its exposed pop-up headlamps and integrated front bumper – a design element that would later appear on the 911 (993). The rear of the 968 featured fully coloured rounded taillamps with special bulbs that illuminated in amber for turn signals and white when reversing.
The 968 was powered by an updated version of the 944's straight-four engine, now displacing 3.0 L with a 104 mm bore and an 88 mm stroke, rated at 240 PS (177 kW; 237 hp) at 6,200 rpm and 305 N⋅m (225 lb⋅ft) of torque at 4,100 rpm. Modifications included a higher 11.0:1 compression ratio, lighter crankshaft, crankcase, and pistons, along with revised intake valves and intake manifold. The engine also featured Porsche’s then-new VarioCam variable valve timing system, optimized induction and exhaust systems, a dual-mass flywheel, and updated engine management electronics. The 968’s engine was the fourth-largest four-cylinder engine ever offered in a production car at the time. A new 6-speed manual transmission replaced the 944’s 5-speed, and Porsche’s dual-mode 4-speed Tiptronic automatic was an available option.
Much of the 968's chassis was carried over from the 944 S2, which in itself shared many components with the 944 Turbo. Borrowed components included Brembo-sourced four-piston brake calipers on all four wheels with ventilated brake rotors, ABS, aluminium semi-trailing arms, and aluminum front A-arms in a Macpherson strut arrangement. The steel unibody structure was also similar to that of previous models.
Between 1992 and 1994, Porsche Motorsports Research and Development built a full "Race" version of the 968, known as the 968 Turbo RS, for customer race teams. The 968 Turbo RS was available in two variations: a 342 PS (252 kW; 337 hp) version using the K27 turbocharger from the Turbo S, built to the German ADAC GT specification, and an international spec version with a KKK L41 turbocharger rated at 355 PS (261 kW; 350 hp) and a reduced weight of 1,212 kg (2672 lbs). The interior featured a single racing bucket seat with a six-point harness and a welded-in roll cage. Modifications also included a modified 6-speed manual transmission with altered gear ratios and a racing clutch, along with racing suspension. Only four 968 Turbo RS models were ever produced, as privateer racing teams preferred the contemporary 911 Carrera RS 3.8.
In the ADAC GT Cup, the Joest team achieved fourth place in the Avus race in 1993 with the Turbo RS driven by Manuel Reuter. In the BPR series, the car was driven to sixth place at the 4-hour race at Dijon in 1994, its best result in the series. The Seikel Motorsport team used a 968 Turbo RS at the 1994 24 Hours of Le Mans, driven by John Nielsen, Thomas Bscher, and Lindsay Owen-Jones, but retired after 84 laps due to an accident.
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The 968 was Porsche's last front-engine vehicle until the introduction of the Porsche Cayenne in 2003. It was also the last Porsche sold with a four-cylinder engine prior to the introduction of the Porsche Macan in 2014. The 968 CS introduced the VarioCam timing system, which would later become a feature of the Type 993 air-cooled six-cylinder engine. The frontal design of the 968, with its exposed pop-up headlamps and integrated front bumper, influenced the design of the 911 (993).
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