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My uncle has a 1991 300TD that reverse is going out on
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Just had same event with my wife's 740iL -- a very well-maintained 100k car too. Problem was hit and miss shifting into reverse along with only reverse sometimes and the intermittent "check Trans" light on dash. We did the $3500 rebuild w/ an independent shop (against my better judgement) -- also the BMW dealerships won't repair/rebuild, they only parts change for new and that at 6 grand. Weeks in the shop and the problem turned up again shortly thereafter. So wasn't in the main trans system it seems and we're out 4 grand plus and the trans still a mess.
Trying to prepare for small claims I've researched a good BMW site for the E32 series and learned more than I wanted to know about Bimmer gearboxes. Namely, we'd likely been had... But some of the info may be apropos to the Benz. A very common problem causing one reverse defect in a BMW is two worn steel washers on the converter output shaft and sometimes the bushing in the bell housing. Tranny has to come out to do the fix but it's certainly not a 3 grand rebuild. This was likely our only defect.
99% sure uncle's problem shifting into reverse is in the valve body since you didn't say there were any problems otherwise. Most German autos, reverse is engaged by a small ball about the size of a BB, this gets worn over time and prevents shifting into reverse. Unless the gear clutches are burned or some other serious damage, the valve body is the culprit. Valve body can be removed and rebuilt (requires some considerable patience and cleanliness), sent out for a rebuild or buy an aftermarket rebuilt with an exchange. Nevertheless whole bunches less than 3-4 grand. Or look at Adsit Co. for a rebuilt whole trans at $1300+/- then haggle for the R&R. As far as the junker swap, the junker tranny maybe just as worn and you've got the R and R labor anyway. Finally, sounds like you need to see the Oregon version of Mr. MB and get a straight story.