Porsche's decision to enter the Indianapolis 500 race precipitated a political battle between other entrants and the rule makers. Despite previous assurances that the Porsche engine would be accepted, last-minute rule changes prevented driver Danny Ongais from qualifying. Interscope, owned by Ted Fields, and Porsche joined forces on this Indianapolis effort. Porsche provided the powerplant and Interscope modified an existing chassis to accept the new engine. The engine for this car, with a water-cooled head and six cylinders, evolved from the Porsche 935 and 936 prototypes. The present-day 956/962C Group C engine, which had been so dominant at LeMans and elsewhere, was also developed from this model. Porsche withdrew the car and canceled its Indy program less than a month before the practice sessions were to begin. No one outside of the Porsche engineers, Ongais and the Interscope team ever saw the car on the track, but in testing at Ontario Motor Speedway (a duplicate of Indy), the car was said to have been spectacular, breaking numerous track records.
With the departure from U.S. racing efforts, the team was able to focus on other endeavors. One such successful outcome was the Porsche - TAG - McLaren Formula 1 program. Near the close of the 1980s, however, rules changes on displacement size saw McLaren and TAG begin their departure from Porsche. Honda offered their engines to McLaren without cost, with the stipulation that they sign Ayrton Senna to the team. As Porsche was only interested in supplying engines, rather than pursuing a partnership with McLaren, McLaren decided to move to Honda engines.
During this time, Porsche's then CEO, German-born Peter Schutz who had been raised in America, was persuaded by Al Holbert, director of Porsche Motorsport North America, to return to Indianapolis.
By this point in history, the USAC sanctioning body had lost the battle for control of open wheel sanctioning to CART.
Holbert managed to secure support from Quaker State Oil while Schutz assigned the Porsche engineering department to begin work on an engine and chassis for the Indy effort.
Unlike the previous attempt to race at Indy, Porsche's return to the brickyard in the late 1980s was a full-on assault, where Porsche was in control of the entire operation. Hans Mezger was tasked with overseeing the creation of the new engine. His team, working from a TAG-Porsche engineering base, developed a new 2.6-liter DOHC single-turbo V8 unit with Motornic management. Norbert Singer was tasked with the chassis development. The chassis design was built using information from their 1980 Indianapolis project. This meant that it was not advanced as most other Indy cars that it competed against. In fact, it was rather outdated and heavy.
With the flaws and growing pains of a new race car, Al Unser Sr. qualified the Porsche 2708 in third from the back at Laguna Seca. During the race, he was forced to retire early.
The final round of the season was at Miami, Florida. Holbert attempted to qualify the car but failed to make the race.
During the off-season, the decision was made to use the engine in an already proven and competitive chassis.
A new March 88C tub was selected and the engine was installed. Teo Fabi was tasked with the driving duties. Even though Fabi was a talented driver, the best result he could secure was a fourth place at Nazareth. At Indy, Fabi qualified 17th on the grid. On lap 34, the car was brought into the pits under caution. Unfortunately, an unsecured rear wheel nut caused the wheel to fall off, resulting in the car bottoming out and an incurable oil leak began.
The project entered even more turmoil in October of 1988 when Al Holbert was tragically killed in a light aircraft accident. This left the project without an American voice or champion for the team.
For the following season, Derek Walker was hired as a consultant to help improve the car and team. Although the team's CART season was rather successful for Porsche, success as the Indy 500 proved elusive once again. Fabi qualified 13th but ignition issues caused the car to retire on lap 23.
Even though the team had a poor showing at Indy, they faired rather well during the rest of the season. They would earn five fourth-place finishes, a third-place, a pair of seconds, and a victory (at Mid-Ohio). Fabi would finish the season fourth in the points standing.
by Dan Vaughan