This was done to bring USA into line with the rest of the world who have always measured engine size by the metric system. This will make life easier for USA exporters and importers. When you get used to it you will find it cuts out all the hassle trying to work out the engine size of a foreign import.
The cubic inch is the Society of Automotive Engineers (SAE) unit of engine displacement, while the litre is the Metric unit of engine displacement.
I think it was a marketing decision. As far as I know, the first us manufacturer to visibly mark a car with its engine displacement in liters was Ford, in about 1965, when the put a badge on one of their high performance cars that had crossed checkered flags and the legend "7 Litre." One of the reasons for remembering this is that it makes it easy to remember the conversion: 7 liters = 427 Cubic inches, which means that 1 liter=61 cubic inches. There is no functional difference. I think the reason that big engines were all right at 427/7 litre was because of a racing rule. I also think that the TransAm racing series in the late 60's (Mustangs, Camaros, etc) limited engine size to 5 liters. Which is why Ford increased the displacement of their 289 small block to 302, and GM went from 283 to 305, which is exactly 5 liters.
Manufacturers changed the cubic inch measurement to liters because liters are more accurate. For example a Chevy 350 is really about a 348 cubic inch but the 5.7 liter is the same as a 350 per sey but 5.7 liters is the exact measurement.
Living here in Australia it frustrates me that the US still use the old stuffed imperial system :(
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Many manufacturers use cc (cubic centimetres) rather than litres.