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This is a trick develped by the PTG race team's engine specialists for all E36 I6 engines and is dyno proven. The reduction in parasitic drag is equivilent to a 6-8hp increase. Removing the driven fan does reduce the cooling efficiency somewhat, but only while the car is moving less than about 10MPH. However by lowering the thermostat temperature, using Red Line Water Wetter and by using a lower temperature fan switch the risk of overheating is eliminated. It is advised that those running forced induction or living in very hot areas of the country (southern FL, AZ, etc) either skip this mod or add an additional high CFM aftermarket electric fan. Another option is to reinstall the fan only during the hotest weeks of the summer while leaving the fan switch and thermostat in place. It only takes about 15 minutes to remove or reinstall the fan itself.
In addition to performance increase removing the fan eliminates the risk of the fan blades coming in to contact with the radiator due to a broken motor mount or faulty waterpump bearings. The fan blades can do significant underhood damage if they contact the radiator or if a broken fan belt wraps around them. Also changing belts is very easy with the fan out of the way.
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Here is the rest of the understeer article for the actual mod:
http://understeer.com/fanclutchmod.shtml