I am having exactly the same problem with a 1980 300sd but my air conditioning works well.

It is the fan on mine. It will now only work on "def" unless the air conditioner is on. Then, all the fan buttons work.

For a long time, I could get it working on "Auto Low" by starting out with "def", but now that trick does not work.

A mechanic looked at it a while back and said I would just have to live with it but here in So. Cal., I want a fan for air but no air conditioning until summer.