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Hi gary,
I too am in the UK and believe that there is NO difference in the transmissions uk or us...
of course the guy could be quite right the transmission is toast...but o nthe other hand it seems to me that when you change the switch position (and the position of the gear lever) its all electrical...now I would wonder about a bad switch, a bad connection or a transmission computer issue...
of course the volvo dealer really cant be bothered..its an 850 and not exactly in their '3 years old or younger' prime market...
as to the shop saying its got a filter..given the exploded view of the trans i have just looked at, plus comments on this board spherical objects is all i can say.
I believe if you pull the transmission computer (battery disconected) you can then drive the car using the stick as a mnaul shifter...but dont take my word on that...
If i were you I would do the gear selector switch and the flush and see..your porbably going to have to do the selector at some point anyway...
If you want to asses the honest quality of your fluid get some fish tank type tubing (clear poly pipe 3/8 diameter) and pass it down the transmission dipstick then attach a syringe to it and draw fluid up into it...(or use a longer pipe and suck!) I bet the fluid is black....
when i did mine the fluid looked FINE on the dipstick - ok maybe the brown side of red but really ok...when i drained it it looked like treackle....
good luck with it, the guy may know his stuff, he may have worked for volvo but sounds to me as if its a 'if it doesnt work right swap it' moment to me...
and hes starting by swapping the MOST expensive bit! -l ike i say he may be right, but it seems to me hes blowing smokeo n the filter bit...
also has anyone connected an analysis unit to the instrument cluster, or a presure guage to the transmission itself? - both recomended test procedures from volvo i beleive
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