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Automatic transmissions equipped with Modulated Torque Converter Clutches (MTCC) require an effective combination of automatic transmission fluid (ATF) - friction material in order to maintain frictional integrity. However, in this study, thermal analysis has shown that ATFs can interact chemically with a friction material used in the MTCC under service conditions, potentially affecting the frictional characteristics. A technique was developed to evaluate friction material degradation. The results of this study showed that the friction material my be chemically altered by static aging in certain ATFs at elevated temperatures. The statically aged friction material samples exhibited thermal analysis signatures which were similar to identical material degraded during dynamometer and fleet vehicle tests. These vehicle tests resulted in deterioration in friction characteristics and experienced shudder.