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Dear jeffryscott,
Hope you're well. Flush the tranny with Wal-Mart fluid (12 quarts; the system holds 9 quarts). If, with fresh ATF, the tranny does not slip when warm, drive it for 1K miles and re-flush with Mobil 1 ATF or similar synthetic. If slippage still occurs, do a trany swap.
This is a neglected car. See the FAQs for a list of things to replace. For example, if the heater hoses are factory-original, they are past the end of their service life. Replace them using Volvo brand hoses: the extra money buys peace of mind. A heater hose replacement is not easy due to limited work room. Moreover, a heater hose failure can cause immediate coolant loss and potentially require a head gasket replacement. Also, replace the heater valve.
Hope this helps.
Yours faithfully,
Spook
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