This tranny has been losing fluid for the past couple of months, a mystery since there is no huge leak underneath. But it has steadily increased tranny fluid use until now it takes 1 quart a week to top it up. When it has proper fluid level it runs great, pulls hills fine (as much as a 2.5l non-turbo diesel can)

Last evening it shifted 1-2, 2-3 and then at about 45 mph the tach zoomed to 5000 rpm and it felt like it had no power beyond that, if you come to a stop and try again it does the same, pulls great until 45 mph then its like it hit a wall and slips and flares and reads 5000 rpm on the tach.
whats going on ? Is it the torque converter or the tranny itself ?

Fourth gear clutch(s) gone. The result of letting it slip too much OR the servo cover now leaks so badly that it won't hold the band or clutch. Try driving in 3 and see what happens. If no joy, it's for sure repair time.

Check the servo covers on the passenger side for evidence of fluid leaks. They will ONLY leak when the servo is applied, so you will leave a trail on the ground when that particluar gear is engaged only (I remember a Ford automatic we rebuilt once -- only dipped in first gear because the very narrow first gear servo cover gakset rolled on installation. Real pain the the sitting part to repair...)

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!