Permanently FIX Your 1998-2007 GM Transfer Case

Merchant Automotive Transfer Case Pump Upgrade: What is it and why do you NEED it for your 1998-2007 GM 4WD?

Written by
Chris Tobin
Published on
November 2, 2020 1:00:00 PM PST November 2, 2020 1:00:00 PM PSTnd, November 2, 2020 1:00:00 PM PST

Transfer cases are an often overlooked yet vital component of your 4WD vehicle. In the case of the 1998-2007 GM 4WD vehicles, with or without Duramax diesel engines, the transfer case is mounted directly to the transmission output adapter. It receives its input power directly from the transmission and passes the power along to the rear wheels via the mainshaft. Using planetary gears along with a chain and sprockets the power is split and handed off to the front output as well when selected, engaged, or automatically activated. In reality they are a relatively simple device that needs little thought, until there is an issue, and it doesn’t work as expected.


The design of the 1998-2007 GM transfer cases (NP136, NP149, NP236, NP246, NP261, NP263, NP261HD, NP263HD, NP261XHD, and NP263XHD used in Cadillac, Chevrolet or GMC pickups, SUVs, and vans) uses an internal pump to lubricate the internal components, the pump is driven off the main shaft and rides in pockets integrated into the rear case half. To save weight the case halves were designed using magnesium, but the pump is aluminum. While both metals are soft, the magnesium is considerably softer than the aluminum and pump movement during normal operation will eventually wear a hole in the rear case half.

A small spring steel anti-rattle clip is installed from the factory to mitigate the movement and wear, but the anti-rattle clip is not up to the task for long term case protection. We have found that in many cases the clip breaks or wears through and must be fished out of the transfer case in pieces to ensure that more damage does not occur.

Generally speaking, the hole appears in the upper portion of the transfer case housing and does not leak when parked leaving little to no evidence in the driveway. Unfortunately, the transfer cases typically leak while the vehicle is being driven with little to no outward indication of the leak unless you frequently inspect the underside of the truck or happen to notice some oil on the bumper or tailgate. Since the transfer cases do not have a dipstick or low fluid indicator light, unless you actually climb under your truck and pull out the fill plug to check the transfer case fluid level it is not easy to know when there is a loss of fluid. Making matters worse, the transfer case only holds two quarts of fluid so any loss of fluid and lubrication can quickly become catastrophic for the internal components.

This problem has come to be known as

“Pump Rub” and unfortunately from our experience it is a matter of WHEN not IF a stock 1998-2007 GM transfer case will experience a pump rub failure. Pump rub is very often fatal to transfer cases because in many cases the vehicle is driven for thousands of miles before transfer case problems rear their ugly head.


To completely eliminate the possibility of pump rub related transfer case failures the team at Merchant Automotive developed an innovative precision-fit CNC-machined T-6061 billet aluminum top plate that replaces the factory transfer case pump top plate and provides much more surface area on the locating tabs. While the upgraded billet aluminum MA top plate is indeed still harder than the magnesium case the larger locating tabs prevent the pump from rubbing through the case as it moves during operation. With the precision CNC-machining handled in-house at the Zeeland, MI Merchant Automotive facility they have complete control over the parts and machining to make sure that every part fits and works exactly as designed. Other than the larger locating tabs the machined billet aluminum top plate fits and functions exactly the same as the factory pump top plate as far as securing the pump gears and pumping lubricating fluid throughout the transfer case.

The Merchant Automotive Transfer Case Pump Upgrade Kit is available as a basic upgrade kit that includes the billet aluminum top plate, blue threadlocker, transfer case gasket, and RTV sealant to complete the upgrade on a transfer case that has not developed a pump rub hole. Optionally customers can purchase the Pump Upgrade Kit with a two-quart bottle of Merchant Automotive’s proprietary Performance Transfer Case Fluid, a Pump Upgrade Kit with a stainless-steel Merchant Automotive Magnetic Drain Plug Kit, or a Pump Upgrade Kit with both the MA Fluid and a stainless-steel MA Magnetic Drain Plug Kit.

For vehicles that have already experienced a pump rub hole in the rear case half but have not suffered internal component damage Merchant Automotive offers Pump Upgrade and Repair Kits for both gas and Duramax diesel powered vehicles that includes the deluxe Pump Upgrade Kit with both MA Fluid and Drain Plug Set as well as a new OE replacement magnesium rear case half. The Upgrade and Repair kits include the needed seals, snap rings, and even snap ring pliers necessary to complete the upgrade and repair. Options for the kits include adding a CNC-machined Merchant Automotive billet aluminum Seal Driver and/or a replacement pump with the MA Pump Upgrade plate already installed. For gas powered 4WDs MA #10770 is the basic Pump Upgrade and Repair kit while #10771 includes the Seal Driver. For Duramax diesel trucks using the NP261XHD and NP263XHD transfer cases MA #10772 is the standard Pump Upgrade and Repair kit, #10773 includes the Seal Driver, #10774 includes the assembled replacement pump, and #10775 includes both the Seal Driver and replacement pump.

We also stock virtually every internal component needed to rebuild and repair your NP261XHD or NP263XHD transfer case including bearings, seals, snap rings, planetary gearsets, shafts and more. So, even if your transfer case suffered serious internal damage you can purchase the Transfer Case Pump Upgrade and Repair Kit along with any additional items needed to complete the repair and get your truck back on the road with easy one stop shopping on the Merchant Automotive website by searching for “transfer case” in the search bar for the full listing of parts available. Of course, you can also speak directly with our knowledgeable and friendly sales support representatives directly by calling (616) 772-9551.

A complete set of Installation Instructions are available to download from the Merchant Automotive website to help most truck owners with basic mechanical skills and hand tools upgrade and repair their transfer case at home. The team even has an installation video hosted on their YouTube channel. Clocking in at nearly 7-minutes long the video gives a brief overview of the installation process for the MA Pump Upgrade that will be a big help to anyone opening up a transfer case for the first time.


Lubrication is important for any moving components and it is absolutely vital for a transfer case.

Most GM transfer cases hold about 2-quarts of fluid including the popular NP216XHD and NP263XHD found in 2001-2007 Duramax diesel powered 4WD trucks. Some “experts” have recommended using 5w30 motor oil in transfer cases even over filling with 3 quarts. While motor oil works great in engines, it is not the best option for transfer cases especially modern ones that have friction material used for synchronization and engine oils simply do not address friction materials in transfer cases and should not be used. Overfilling can present issues as well and we do not recommend using more fluid than the factory designed and recommended to be used with each transfer case. The factory fill in many transfer cases is ATF and while that will work for transfer cases and does work well with friction materials it does have some drawbacks including driveline clunk caused by friction and binding on the output shaft splines.

To address the shortcomings of traditional lubricant use in transfer cases the team at Merchant Automotive developed their propriety Performance Transfer Case Fluid. MA’s Performance Transfer Case Fluid is first and foremost a lubricant developed from a synthetic base for the internal transfer case components. But it is more than just a lubricant, it uses the proper additive package for the internal friction materials of a modern transfer case to provide a smooth and quiet engagement and disengagement of 4WD. It also has modifiers that help eliminate driveline clunk by properly modifying the output shaft splines through normal operation. Even when using our Performance Transfer Case Fluid, we still recommend following a maintenance routine for your transfer case that includes regularly checking the fluid level and changing the fluid every 2-years or 50,000 miles whichever comes first.


Not everyone has the time, tools and skills required to upgrade and/or repair their transfer case, and some may not want to tackle the job even if they have everything they need.

We have an option for those customers as well with completely new NP261HD, NP263HD, NP261XHD and NP263XHD transfer cases. But rather than simply selling customers a new transfer case with know pump rub issues built in from the factory we disassemble each new transfer case and install our billet T-6061 aluminum Pump Upgrade top plate on each pump before reassembling the case and shipping it out the door. This ensures that these new transfer case will never experience pump rub issues and will deliver a long life in each truck they are installed in.

There are no core charges for these new transfer cases and no returning of the old transfer case to make it a hassle-free experience. For peace of mind Merchant Automotive backs each new transfer case with a 2-year unlimited mileage warranty and includes a 2-quart bottle of Performance Transfer Case Fluid and an MA Magnetic Drain Plug set for each unit. Keep in mind though, that the cases are not filled before shipping so you will need to fill the transfer case after you install it in your truck. Driving it without transfer case fluid will damage the new transfer case and it will not be covered under the warranty.


As experts in the Duramax diesel and Allison transmission field we want to help our customers get the most out of their vehicles. With that thought in mind we have developed a full line of Transfer Case Pump Upgrade and Repair options to make sure the power is sent successfully to all four wheels whenever there is a need.

So, whether you want to do a transfer case pump upgrade to protect your truck against a “pump rub” issue before it arises, or need to completely rebuild a transfer case that suffered a major “pump rub” failure—the Merchant Automotive team has you covered. Feel confident in purchasing from the innovators of GM transfer case pump upgrades, we developed the best solution with the original T-6061 billet pump top plate upgrade and offer kits to upgrade and/or repair your 1998-2007 GM transfer case permanently. We offer easy one-stop shopping with everything from the basic upgrade kit to a full upgrade and repair kit or even complete transfer cases with the pump upgrade already installed to keep or get your 4WD GM truck back on the road quickly.