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On 96-97 850 models and all 70 series, the speedometer is driven by a signal from the ABS unit.
The signal is a square wave and depending on the frequency, the speedometer reads the speed.
When the ABS unit loses more than two wheel speed sensors, the speedometer will stop working. The ABS unit cannot calculate the speed anymore. This happens when you drive with a defectve ABS unit for a long time.
When you remove the ABS unit, you lose the speedometer.
Read more about it here.
http://home.earthlink.net/~vicrocha/Volvo_Parts/Volvo_V70_ABS.htm
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