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Most likely the problem is the shift lever mechanism internal to the transmission is loose. This will cause the shift valve from being moved to the appropriate position. I have seen this in Ford C6 trannys as well. The problem can be easily fixed by removing the oil pan on the tranny and tightening the retaining nut on the shift shaft. There is also the possibility of a valve body problem. A B&M shift kit would fix the issue in that case...

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Q: Your GM TH400 drives forward in all gears including reverse and neutral?
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