The auto-climate-control is telling you it has a fault. Check the FAQ or see a shop for help. You're probably lucky it lasted this long.

The other dash lights do sound like an alternator on the way out. The brushes are replaceable for a few bucks. Try that, you've got nothing to lose, and it's not too hard to get at on a 7 series. Also check all the connections to the back of the alternator and all grounds and battery cables.
If you've never checked with Volvo, you should call the service dept and see if there are any outstanding "campaigns" on your car, that is free warranty updates or recalls that never got completed. You give them your VIN # and they tell you if anything has been missed. The late 80's cars have recalls for battery cable faults that cause fires. You don't want to know what happens if the cables short. It ain't pretty.
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Rob Bareiss, New London CT ::: 86 244DL, 87 244DL, 88 744GLE: 625K total