What happens to automatic transmission fluid when overheated?

When automatic Transmission Fluid (ATF) is overheated, it can break down chemically, leading to reduced lubrication and increased friction within the transmission. This degradation can cause the fluid to lose its effectiveness, resulting in poor shifting performance and potential damage to transmission components. Additionally, overheated ATF may produce varnish and sludge, further obstructing fluid flow and cooling. Regular monitoring and maintaining proper fluid levels and temperatures are essential to prevent overheating and prolong transmission life.