What is this?

There is a tiny gap on the bottom of my tranny/t-case (peugeot/231) right where they connect. It looks like there is liquid slowly leaing from it (red fluid) I took it to a shop to get oil changed and they thoughtit was a crack....but my manual shows it and my friend has the same gap. Is it suppost to be there/ leaking fluid? I can get pics if somoene needs them. im thining of swapping it for a ax-15 cause the peugoet is acting up

A Peugeot acting up? Say it ain't so! (yes, I'm being a smartass - I'm on my third...)

Generally, when two assemblies bolt together with flush metal mating surfaces, a small hole, gap, or slot is left for exactly the reason you're seeing - so you can tell when a seal is leaking. You'll want to change your transfer case input shaft seal - and you'll have to remove the transfer case (obviously) to do it. As I recall, the front bearing retainer will unbolt from the case, so you should not have to disassemble the case totally.

Now, I just need to find an AX-15 (good) or NV3550 (preferred) so I don't have to change this damn gearbox anymore... Like I said, I'm on my third in my 88 since I bought it - and it had had two or three in it before then. I don't know why AMC spec'd it - unless Peugeot was deeply involved with Renault at the time...

5-90

nicee....ax-15 it is

Sorry to hear you NP231 is bleeding! The Dexron III fluid the NP231 uses is red. So if your NP231 has red fluid appearing anywhere on the outside you got a leak. It will acumulate at the lowest part on the TC below the leak. It could be the yoke seals or the gasket failing where is separates.

Clean it up real good, drive it and look to see if the fluid is coming from the yoke seal and just dripping down to the all the places you initially detected the NP231's life blood. If so then you got it easy and just tackle the bad seal. If your not so lucky and it is where it separates you'll have to crack it apart and reseal it.

If you end up having to do the dirty deed of cracking it open you've already located one of the cool slots that New Process milled into the case. These two slots are for you to stick two big screwdrivers in and pry it apart to separate it. Good luck on sealer it up. Not a fun job!