Check the ground point for the OD (its on the transmission tunnel next to the left front corner of the AT Console cover,under the carpet) a non working ground point can cause all kinds of havoc with the dash system (defroster, AC etc) also check the wiring that lives in the shifter stalk, a bad cable can cause a No Go situation when the relay/solinoid is perfectly fine.

Also check the ground points at the upper left and right corners of the metal frame behind the center console face. Even if the wires look fine any corrosion that exists BETWEEN the ring terminal can cause a problem. Try removing all and cleaning and coating with copper flux to imporove contact quality.

Get a good VOM meter and run resistance checks on all grounds, not jiust a continuity BEEP test but an OHMS check and you may be surprised to see the difference a wee bit of grunge can cause. I have had circuits that BEEPED just fine but showed an 85% loss in resistance due to corrosion.

Hi. How much do you trust that mechanic? Or, giving him the benefit of the doubt for his honesty if not his knowledge, how familiar is he about Volvos, specifically?
Probably 19 out of 20 times (may 99 out of 100, given your tranny's age), the problem is strictly electrical and external to the transmission. Either the relay (by far the MOST likely cause), located in your dashboard: or the switch on your shifter (least likely); or the wiring between the switch and the solenoid on the transmission ("middle" likelihood), under the car, is to blame. Lots of time, the wires's insulations wear and they short.
I'd get a second opinion from a more knowledgable shop before I spent $2,300 on another transmission for this problem.
Good luck.

I am not sure if they are related, but the OD could be a simple repair. The price he quoted you is a little over the top, but then again, I don't know if you went to the stealer or some monkey-with-a-wrench!

Does the overdrive-off light stay on? I betcha he never even diagnosed the relay. You have to have a good relay to rule this out...did he do really do this check? I had the same problem in my 240, which turned out to be the relay. the solder connections had some crack in it. All I had to do wa reflow some new solder on all connections. Took care of the problem.

If I were you, i would pull the relay out. Pull the glove compartment out and the relay is located to the left of it (white in color). Pry open the plastic case and carefully inspect all the solder joints. Any crack should be re-soldered.

If the relay isn't it, it's most probably the OD solenoid, which is probably sticking. I am not exactly sure how to repair it, but Bentley manual outlines this procedure very well.

When was the last time you flushed the ATF? This should be done every 20k miles. However, ATF issues would affect the trans in low gears than high.

The AW70/71 transmissions are one of the best out there, even more solid than what BMW offered during the same time frame (ZF-4HP22). I would srongly doubt the trans is shot!

Good luck,
SM
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90 BMW 325is, 98 BMW 528i, 90 Volvo 240DL