Before you junk it..

Change the fluid.

The night I bought my 300CD (which I was told flared, and I assumed it was the 2nd -> 3rd thing) it drove like a champ for 75 miles until I stopped for gas. After my fillup it got up to speed (70 mph) then slipped back into 2nd gear.

I was able to coax it back into 3rd a couple of times but eventually it wouldn't even engage 1st.

Did a fluid/filter change. (including the TC)
Added a quart of transx
now it shifts fine although it flares a little between 2nd and 3rd.

Your transmission is probably wearing out.

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'84 300CD Turbo 132k (Anthracite Grey) - WVO - My daily driver - Recently named coo-coo-coupe by my daughter.
'84 300D Turbo 240k (Anthracite Grey) - Garage Queen
'83 300D Turbo 220k (Orient Red) - WVO - Wifes daily driver

I'm not a certified mechanic, but I did stay at a HolidayInn Express last night.