'98 S70 Bizarre Transmission Disengagement

[see1]

Hi all,

My sister was driving her S70 (140K miles) the other day and the car dropped out of drive. Luckily she was in a parking lot at the time so no damage was done. The car is now home so we've had plenty of opportunity to diagnose the problem - but it still eludes us!

After sitting a while the car starts and drives fine. However, after a couple minutes in idle or drive the car seems to drop out of gear completely; shifting does not help, and restarting the car doesn't improve things. The arrow-shaped light begins flashing, which, according to the car manual, indicates a fault in the automatic transmission.

Ruled-out possibilities:
Low transmission fluid - the fluid level looks good.

Electronic throttle module - this seems to be ruled out by the fact that the engine responds perfectly to the throttle pedal.

Shifter - the engine revs slightly when gears are shifted, suggesting the shifter is working.

Limp-home mode - I read something about limp-home mode but the car will not drive at all - even in the low gears.

I talked to a Volvo "expert" who concluded that the clutch plates inside the auto transmission are slipping when the car is in gear. His explanation as to the car driving when cold was that the trans fluid becomes thinned as it warms up; this seems hard to believe when the car has been running for all of 2 minutes.

tl;dr
The car starts and drives fine for a couple minutes, then drops completely out of gear until cold again.

As I would like to avoid a transmission replacement for obvious reasons, my uncle and I are planning to refresh the transmission fluid and see if it helps. Does anyone have a good idea as to what's going on here?

Ben

[kallekula]

That was one of the ways my tranny told me it was about to retire. It didn't look pretty inside. Sad to say but you are probably in for a transmission replacement Of course try the flush but I seriously doubt it's gonna make any difference..