1999 V70 XC fluid leak caused small fire&later axial gear froze

My son was driving his 1999 V70 XC & noticed smoke coming from rear of car.
Pulled over and lifted hear and saw small flame and doused with water-put
it out. Car would start but would not move. Car came to normal start and
accelerated fine prior to stopping. Tow truck arrived and front axle would
not turn. Dealership reported axial gear needs to be replaced($2,980) &
then see if transmission affected. Aware of recalls or tech bulletins
about this? Diagnosis sound reasonable?

 

This is commonly called the angle gear. This takes power to the
driveshaft for the rear wheels. It is the most (by far) common failure
in the early AWD system. Usually, a tire size difference is to blame -
the different axle speeds front and rear cause the viscous coupling to
start to lock up. This causes driveline windup which stresses all the
driveline parts. The weak link is the oil in the angle gear, which
overheats. This can cause fires and/or angle gear failure. There are
many tech bulletins about this.

Google (Volvo "angle gear") - Note quotes and leave out parentheses.

--
Mike F.
Thornhill (near Toronto), Ont.

Replace tt with t (twice!) and remove parentheses to email me directly.
(But I check the newsgroup more often than this email address.)