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This is a wagon, yes? Some 1997 model year 855's and 965's (and some 96's) had a problem with the latex backing on the carpets that cover the wooden floor lids in the cargo area. This affected cars built before Sept 1, 1996, chassis numbers 0275000 to 0310173 for the 855. The odor is garlicy, not mildewy. I notice it most when the car has been shut up for a while, and it is warm and humid out. It goes away as soon as you open the windows and start driving.
Volvo will replace your floor lids at customer request. Tell them to refer to Tech-DCS number 85-07, dated 10/02/96.
I wish you luck. My car definitely has this problem, but because it isnt in the range of chassis numbers listed on the Tech-DCS, Volvo wouldnt do bupkis for me, and I have to live with the smell.
Richr
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