Problem: Wire strands in the twisted pair connecting the vehicle speed
sensor to the speedometer break progrssively inside the wire insulation
until the speed signal to the speedometer is intermittent or completely
lost.

Primary cause: Excessive mold clamping force between the platens where
the wire exits the mold, during injection molding of the waterproof
silicone rubber, work hardens the copper strands making them brittle.

Secondary cause: The is no mechanical stress relief between the plug
connector and the unsupported wire run to the grommet in the trunk
housing. Normal but prolonged vibration/oscillation of the wire
eventually fatigues the brittle section of the wire and the individual
strands break one by one.

Repair: Pull the connector from the vehicle speed sensor on the
differential cover. Mark the plug connector with the wire colors.
Dismantle the plug remove the two wires from the plug connector and pull
to check the integrity of the wire strands inside the insulation. Most
likely the the wire is broken or only one or two strands are still
intact. Go to a Volvo dealership and buy two repair wires with
waterproof connectors. They can be variously listed under old parts
bulletins for the early windshield washer retrofit on a 240 or for ABS
wheel sensor harness repairs for 740's. Peel/split the cover back on the
harness about six inches and  snip off the old wire ends. Splice in the
new wires mark each end with the color of the mating wire. Restore the
twisted pair configuration of the wires by twisting the new wires around
one another to minimize RFI on the wire. Insert each of the marked wires
into the proper receptacle of the plug. Reconnect the plug.

There is also the possibilty that the speedometer head is faulty, but
the speed sensor failure is inevitable.

Bob