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All european Audi ur-quattros use a hydraulic braking system - this discussion does not apply to North American cars fitted with camshaft-driven vacuum pumps. From 1980 to 1987 this was a combined power steering and brake assist system, well described in the (11MB) Introductory Service Training document. From Model Year 1988 onwards (MB and RR engines) the power steering and brake assist system share only a fluid reservoir and parts of the hydraulic pump.
In the early system fitted to WR-engined cars, a single hydraulic pump mounted on the side of the cylinder head at the front of the car pumps fluid from a cylindrical light alloy header tank mounted on the bulkhead down to a regulator beneath the brake pressure accumulator, which is also known as "the bomb".
This regulator effectively splits the flow of fluid - some going to pressurise the accumulator and some going to operate the power steering. It has either one or two pressure switches mounted on it - only the upper accumulator status switch is mounted on the earliest cars, with a second supply switch being added lower down later.
The fluid used is ATF Dexron - noticeably red in colour. The green hydraulic oil used in the later system (Audi part number G 004 000 M2) can safely be used in this system.
On Model Year 1988 and later MB and RR cars, a tandem pump does this splitting. The rear part of the pump is a standard power steering pump fed by a translucent header tank. An internal hole feeds a small amount of oil into the front section of the pump which uses two tiny pistons driven by an eccentric to supply high pressure hydraulic oil for the brake assist system. The smaller of the three hoses coming from the pump goes to the brake pressure accumulator which contains a built-in regulator.
The high-pressure part of the MB and RR pump can be tested empirically - with the drive belt removed, the pump should offer stiff resistance twice per revolution.
The later system uses green hydraulic oil - original Audi part number G 004 000 M2. Using ATF in the later system will destroy some seals and cause serious damage.
The device mounted directly under the tandem master cylinder and servo is a brake pressure proportioning valve. Its operation is explained well in the (11MB) Introductory Service Training document. Basically all quattros use a fore-and-aft dual circuit rather than a diagonal split. If the front circuit is functional, pressure to the rear is reduced. If the front brake circuit fails, the rear circuit is connected directly to the master cylinder. This device is also non-linear even when all brake circuits are working - it diverts proportionately more effort to the rear under heavy braking and almost nothing during light braking; gentle driving is a common cause of rusty rear brake discs. Its main mode of failure is a weep on the cylinder housing facing the front of the car - this is visually obvious. Testing it for correct function requires attaching brake pressure gauges to the front and rear brake circuits and is best left to a specialist.
Components for the braking system are expensive and it is not advisable to use scrapyard parts if this can be avoided. This means that part-swapping in the hope of finding a fix is not a viable approach.
Although many now criticise the ur-quattro's brakes, when performing properly they are fully up to the demands of what is a very high performance car. If they weren't, the German TüV would never have granted a roadworthiness certificate. It is also inconceivable that Audi - a major pioneer in vehicle safety - would have let the car leave the factory with inadequate brakes. The same factors apply as to "chipping" - the first thing to do is make sure that what is already there is working as it should. Once that is done, three-quarters of owners have adequate performance and lose interest. This is also true of brakes, and unsatisfactory performance is usually caused by low pump output pressure or a defective pressure regulator. E.g., for the WR ur-quattro, the pressure warning switch closes below 36 bar but the system's nominal operating pressure is 57 bar - this means a 30% shortfall in pump output pressure can be hidden in the system. With the MB and RR, it can be as much as 40%. If the hydraulic assist warning has been interfered with in some way (pressure switch or voice synthesiser disconnected) then the sky's the limit.
It is unfortunately very common to find vehicles offered for sale with such warnings disconnected because the vendor cannot afford to have them fixed properly.
For track or competition use, upgraded brakes (AP Racing, brembo, Porsche monobloc) may be an option. Be aware that most such upgrades prevent the use of a reduced size emergency spare (the rim fouls the larger caliper) and a full-size spare must be carried. Most such system use proprietary or special purpose pads, most of which do not have the pad wear warning connectors that are standard on digital dashboard WR ur-quattros. The suppliers' instructions must be followed, using the wires from the discarded pads to bridge the connectors and not modifying the vehicle's loom.