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Revisiting the New Venture 246 Transfer Case

Revisiting the New Venture 246 Transfer Case

Up to Standards

Subject: Operation, diagnosis and repair
Unit: NV 246 EAU transfer case
Vehicle Applications: GM full-size trucks and SUVs
Essential Reading: Rebuilder, Diagnostician, R & R 
Author: Mike Weinberg, Rockland Standard Gear, Contributing Editor

Up to Standards

  • Subject: Operation, diagnosis and repair
  • Unit: NV 246 EAU transfer case
  • Vehicle Applications: GM full-size trucks and SUVs
  • Essential Reading: Rebuilder, Diagnostician, R & R
  • Author: Mike Weinberg, Rockland Standard Gear, Contributing Editor

The New Venture 246 transfer case has been in production since 1998. New Venture, however, is no longer with us, having been acquired by Magna International, a large conglomerate that is a tier 1 supplier to many of the global auto manufacturers. I wrote a previous in-depth article about the NV246, which you can download from our website ( for free, explaining the workings of this active-transfer-case theory of operation and electronic controls. Go to Technical, and find NV 246, Understanding the Tricks, under the transfer-case section. This article describes the design changes and the fixes for common problems and design defects for this unit.

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Now designated the NV 246 EAU by GM, this transfer case is found in GM trucks (Tahoe, pickup, Yukon, Suburban, Suburban EXT, Escalade and Avalanche) and as such represents a large production volume. The 246 has several variations depending on the vehicle and the transmission used. If the transmission is an RPO M30 code the unit will have a 27-spline rear output shaft. If the transmission is an RPO code MN8 or MT1, it will have a 32-spline output shaft. The accompanying diagrams and illustrations apply to a 2005 Tahoe, as several design changes were made in that model year.

You will always need the correct wiring diagrams for the truck model you are working on. In 2005, design changes incorporated internally included a change in the range shift fork. Previous years used nylon pads on the fork, and this was changed to Vespel pads of a two-piece design. The three notches on the fork to locate the pads were made deeper to accommodate the Vespel pads, and the high/low-range sleeve was widened for the new pads. Units with a 27-spline rear output shaft have a three-pinion low planet, and the 32-spline models use a six-pinion low planet.


The NV246 is an “active transfer case” that is computer controlled, has an internal clutch pack and fork to apply the clutches and has 2WD, A4WD, 4WD HI, 4WD Low and neutral positions. Three speed sensors each send an AC-voltage signal. The vehicle-speed sensor informs the powertrain control module (PCM) of the vehicle’s road speed. The PCM forwards this info to the transfer-case shift-control module through a Class 2 serial data bus. The other two speed sensors monitor front and rear output-shaft speeds.

In A4WD, 95% of the power is directed to the rear wheels until the computer sees a difference in speed between the front and rear prop shafts. The computer considers this a slip and then signals the encoder motor on the transfer case to apply the internal clutch pack to send power to the front wheels until the shaft speeds are equalized, at which time the clutch pack will release. This happens instantly with no input from the driver and permits the vehicle to be driven on dry pavement without crow hop or driveline windup. The 4W Hi and 4W Low modes lock the clutch pack to deliver a 50/50 torque split to both front and rear prop shafts and should not be used on dry pavement, as crow hop and driveline windup will occur.

The more complex a system is the more problems can be encountered, so this unit generates a lot of tech-line traffic. There are two steps to take before you do any diagnostic work on one of these units. First, check battery voltage, as a lot of time is wasted checking codes and problems that are created by a less-than fully charged battery.


Next, measure the circumferences of all four tires. Using a stagger gauge will allow one man to check the true sizes of four tires in five minutes with the vehicle on the ground. You can lift the vehicle and use a tape measure around the center tread of the tires, or you can make chalk marks on the tires at 6 o’clock and drive the vehicle a set distance and see the difference in rolling radius, but this is a 30-minute deal. All four tires must be within 1/4 inch in circumference or there will be problems. Over the years I have had many people, especially tire stores, tell me the sidewall label tells all. This is nonsense, as tires even when new grow to different circumferences when you inflate them. If you wish to believe that the labels are correct, no one on any tech line can help you. If there is a difference in tire size the computer believes that there is wheel slip and applies the clutch pack, trying to compensate. Unless you measure the tires bring your lunch, ’cause it’s going to be a long day.


Real-world experience and fixes that shorten repair and diagnostic time

Encoder motors perform several functions: first, telling the shift-control module (Figure 1) which range/mode the transfer case is in; second, turning the shift sector when commanded to engage the desired range or mode; third, applying the internal clutch pack. The motor is capable of applying 300 lb.-ft. of torque to the clutch pack. The encoder motor works with a maximum of 5 volts from the shift-control module, so never put 12 volts to any input to the encoder motor or it will be fried food.

The encoder motor is equipped with a clutch brake that is applied electronically to hold the motor in a fixed position after the completion of any shift. When you are replacing an encoder motor, the transfer case has to be in the neutral position. If you need to turn the encoder-motor shaft, you must first unlock the motor brake by hooking up a 9-volt battery to the orange and tan wires. There will be an audible click as the brake unlocks, and you can turn the motor shaft. Be careful not to turn the motor shaft too far in either direction, as over-travel will ruin the motor.

The No. 1 tech call on these units involves the transfer case falling out of 2WD. This is caused by a failed encoder-motor brake. This unit has no detent except the electrically applied internal brake in the encoder motor; hence, a failed brake and the transfer case cannot mechanically hold the selected range. When replacing the encoder motor, after you have installed the motor on the transfer case and reconnected the electronic terminals, remove the battery negative lead. Reconnect the battery and turn the key to ignition run. Push 2WD selector button four times and the light will go on for 2WD, and the installation is complete.

The shift-control module is behind the dashboard. If you are replacing the module, remember that there is one module with a variety of different software for different vehicles. After installation you must program the module with an appropriate scan tool by entering the VIN of the vehicle you are working on so that it will select the correct program internally for that vehicle’s parameters.

The 246 has a gasket between the transfer case and the transmission (Figure 2). Always reuse or replace the gasket. Never use RTV sealant between the cases.

The seals on these units are different from what you may be used to, having inner and outer (Figure 3) seals that require special installation tools. You can get them from Kent-Moore or make your own. These are expensive seals, and many fail because of poor installation.

1998-2002 models of the 246 have a 100-lb. preload on the clutch pack, and the front prop shaft will turn in 2WD. In 2WD the front-axle disconnect will prevent torque transfer to the front wheels and will engage in any of the 4WD ranges if it is working correctly. A failed front disconnect that does not release will have the front axle under power even in 2WD. 2003-up models have a slight preload on the clutch pack, and the front prop shaft will turn freely in 2WD with a small amount of drag. Note that early (1998-2002) and late clutch packs and clutch housings are different, and the pressure plates and components are not interchangeable. A complete set – housing, clutch pack and pressure plate – can be used in any model year, but individual parts cannot be exchanged.

The major design flaw in the NV 246 is its magnesium case. Magnesium is lighter and stiffer than aluminum; however, magnesium and steel react to each other chemically at a molecular level. The bolts that hold the two case halves in place are specially coated and have aluminum washers. Putting raw-steel bolts into one of these units will cause erosion of the cases. Since the bearings on the shafts are steel, there is continual failure of the bearing bores because of the dissimilar metals and the force applied on the clutch pack.


The oil pumps in these units are driven off the rear output shaft and are able to turn slightly in the case, ultimately beating a hole through the rear case half and causing a small leak. As the driver will never get under the vehicle to check the oil, when you see one of these it will be out of oil and basically junk, requiring replacement of both case halves and most of the internal parts.

There are several protective devices on the market to prevent further oil-pump “beat-through,” but they do not fix the problems of steel bearings in a magnesium case eventually wallowing out the bearing bores. We manufacture a replacement case of aircraft-grade aluminum that is designed for extreme duty and weighs 4 lbs. more than stock. These cases come with a lifetime warranty against pump “beat-through” and wear in the bearing bores.


Another problem with the magnesium case is elongation of the sector -shaft hole, again because of clutch torque application and steel-on-magnesium issues where the rear bearing has excess endplay. The common problem is that the case wears and the unit cannot shift into 4WD or out of 4WD Low.

If you take the time to download the first article and combine it with this one, you should have solutions to most of the problems, electronic and mechanical, at your fingertips. As always you will need wiring diagrams to check on problems outside the transfer case, and a qualified scan tool.


Happy New Year.



Transmission Digest