Anybody have this problem before? Velvet drive issue

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I just bought a 1979 Hershine 37' Trawler. 120 Lehman diesel / Borg Warner Velvet Drive. Left Eagle Harbor on Bainbridge Island, WA for 2.5 hour run. Tide with me all the way. Started out @ 8 kts +/-. After an hour or so speed kept dropping. Ended trip at 1.5 kts with same engine speed of 1500 rpm. Engine sounds beautiful. I was in a serious time jam up and left anchorage without checking trans fluid. When I noticed the radical GPS speed drop I first thought I must have read the tide tables wrong. Double checked...nope! Went back and looked at exhaust all seemed normal. Looked in hold briefly (boat was not in a position to stop due to rocks etc.) saw nothing amiss. Am suspecting clutch discs toast. Anybody run in to this kind of problem before?
Harbor Marine in Everett probably rebuilds more Velvet drives than anyone else in the country. Call them +1 (425) 259-3285 and ext 103 is Mike Vogt.
 
If the clutches were slipping, there would be much heat generated. This is not happening & fluid looks good, you report.

Therefore if the shaft is turning at the expected speed, then more than likely the shaft key is sheared, and needs repair before the taper is really messed up (if not already, requiring a shaft pull).

If the shaft is not turning in gear, then something would have to b sheared in the VD or drive plate, and it would be noisy.
 
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