I'd almost put money on it being related to those wires under the crank pulley. They take a beating, and Volvo's insulation on those harnesses was total junk those years.

Most 86's I've worked on lately have had either a new harness (from a late 87 or 88, or NEW new), or they've had the red alt wire cut and re-routed around the right side of the engine compartment. This fix does not have to be half-assed. It'll look ok when secured with tie-wraps or electrical tape and done neatly. The wire can cross from body to block along next to the ignition harness. The upper termination is the grey firewall connector. I think it's only got one small red wire in it.

Also check the alternator ground wire, very important, for good connection at each end. It bolts into the block right under the alternator- hard to see without the splash pan off.

Good luck with it!
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Rob Bareiss, New London CT ::: 87 244DL- 249K, B230F/M47, Turbo sways, Bilsteins, GT braces, Virgos, Turbo exhaust, Gislaveds for winter!