Quick question. I have a '85 245 with auto trans I want to install a M46 to.
Do I have to swap the rearend from the manual or can I leave my auto rear in place? Will there be any issues? Thanks.

I agree that you should leave the rear axle as-is if you do the trans swap. Your AW70 automatic does not have a lockup torque converter, so your highway RPM is a little higher than what you would get from trying to do the math on gear ratios, due to converter slippage. The M46 of course has a solid mechanical connection (clutch) so even with its slightly "lower" overdrive ratio, you are probably going to see only about a 8-10% increase in highway RPM. Something like 2500 at 60MPH instead of 2300.

You will run out of RPM's rather quickly in first gear (4.03 ratio), but overall acceleration - especially in 4th and OD will be better. Fuel economy penalty?...yes, maybe a couple of MPG on the highway.

Along with all the other components to be changed in this swap, you may need a different speedo drive cable, assuming you sourced an M46 with the cable drive output on the OD housing. Volvo may still be able to supply the proper plastic cable drive gear in the OD tailshaft, to account for the change from the 3.31 axle the trans was likely originally coupled to. Depends on the year of the donor car. It is easy to change that gear. Otherwise your speedo/odo will read about 13% higher than actual.
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Bob: Son's XC70, my 83 244DL, 89 745 (Chev LT-1 V8), 98 S90 (recently sold) and 2010 XC60. Also '77 MGB and four old motorcycles

I have done some rear end swapping when I built my VolvOlds (215 all aluiminum V8) Built the car using a '76 265 body with 3.54 rear. 20mph per 1,000rpm was to much gear -- especially with the 1:1 top gear ratio of the Old's auto trans. Drove it that way for years before swapping in a 3.31 from a '75 164. The car was noticeably slower from a stop -- plenty ok while moving -- mpg went from 18 on the road to 21. I mention this just so you know I'm speaking from experience.
Before '83 or so an M46 car had a much shorter gear (3.73, I think)than the 3.31 - but the M46 already has a stump puller 1st gear so in the sense of flexibility 1st is more usable--but a 240 with the 3.31 is a dog from a stop. If I were you I would leave the 3.73 auto gears--the M46 overdrive will still give low rpm on the highway (albeit slightly more than the .7 ratio top gear of the AW70/71). Since your car is pre-electric speedo you may have to futz with that aspect - or just make mental calculations--for instance the Olds cable drive connected to the cable to the 265 speedo had me making a 10 per cent adjustment to mileage and speed (I cheaped out-no fancy converter). -- Dave