It is the Speed Reducer/ Transfer Case. The gearing is 1.58 to 1. The Muskeg Tractor M7's didn't need to change the direction of the driveline and so they were faster. They would go over 20mph but yours tops at 16 and were really 12mph machines. Some carriers had another output shaft high on the passenger side of the tyransfer case, facing forward and high, to run a heavy winch that bombardier built for logging. Some has a lighter Braden winch, lower on the deck and PTO driven. That is the one I used and it was a good setup. Never had trouble with that part and don't know what makes it tick. Is it stripped ?? Hopefully it can be rebuilt. Finding a replacement may be difficult. I don't remember the service it required either but I suppose it is gear oil bath type case. It was a long time ago and the carrier was a bit older than yours.
