It can be a problem with the shifter itself not communicating to the PCM/TEHCM once you place it into manual mode...The only way to know for sure is to put a scan tool with live data capabilities...Plug the scan tool in, bring up 'Transmission' data then fire the engine up...Note the range being displayed on the scanner (it should say 'Park' or 'P' if you're in park)...Then, with foot on the break, shift it into M1 - see if the scan tool shows 'M1' or 'Manual' displayed...If not, it is likely a shifter problem, or at least the Internal Mode Switch isn't seeing the change or the IMS itself is bad (rare, not likely) or the TEHCM is no good (i.e. they sent a DOA TEHCM - not likely either).To clarify the history - the shifting problems began around the first of this year, and the manual shift mode stopped working at the same time. The two shops I took it to prior to the dealer both said it need a transmission rebuild or replace. They did not say that the manual shift mode, which I noted in my complaints, was a separate issue that would not be solved by the transmission replacement. I went with the dealer trans because of the warranty.
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If M1 is displayed, then you'll need to determine if the TEHCM is bad (i.e. shift solenoids stuck off, CPC solenoids not functioning as they should, etc...Here's a diagram showing all of the TEHCM's variable force solenoids and their function patterns based on each gear:
Let us know once you have had a chance to diagnose with the scan tool.