One problem related to transfer case has been reported for the 1999 Volvo S70. The most recently reported issues are listed below.
The consumer had difficulty controlling the vehicle because of a failure with the rear end and rear tires. The problem worsened when accelerating and decelerating. There's was also a nauseating tar like smell within the cabin of the vehicle. The dealership indicated the transfer case had shredded which caused an oil leak. The part couldn't be replaced for almost three weeks due to a nationwide back order. After 3 and a half weeks the transfer case was replaced. Within 48 miles the vehicle began to exhibit symptom of the previous failure. The vehicle was taken to a different dealer. The technician indicated that both failures were secondary to the tire dealer putting an incorrect tire size on the front passenger side of the vehicle. This caused the vehicle to register that the tire was constantly slipping.