You have a broken vacuum line in the engine compartment (hopefully) or a major leak somewhere.

The ACC uses vacuum servos to direct the air flow, and the default position is defrost (for safety reasons). Defrost only with normal temp control indicates lack of vacuum to the system. I believe the hose is hard plastic, gray and red stripe, but I'm not sure.

Time to check all the vac lines anyway on that car, likely the rubber connectors have deteriorated badly and are all leaking.

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!