UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q


        [ x ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended December 31, 1997

                                       OR

       [   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

             For the transition period from _________  to _____________


                         Commission file number 0-18083


                             Williams Controls, Inc.
                             ------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                         84-1099587
--------------------------------                          --------------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

      14100 SW 72nd Avenue
          Portland, Oregon                                             97224
---------------------------------------                    -------------------
(Address of principal executive office)                             (zip code)

              Registrant's telephone number, including area code:
                                (503) 684-8600


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                              Yes   X    No

The  number of  shares  outstanding  of the  registrant's  common  stock as of
January 31, 1998:  17,932,040



<PAGE>









                             Williams Controls, Inc.

                                      Index


                                                                            Page
                                                                          Number

Part I.  Financial Information

  Item 1.  Financial Statements

           Consolidated Balance Sheet, December 31, 1997 (unaudited)
              and September 30, 1997                                         3

           Unaudited Consolidated Statement of Shareholders' Equity,
              three months ended December 31, 1997                           4

           Unaudited Consolidated Statement of Operations,
              three months ended December 31, 1997 and 1996                  5

           Unaudited Consolidated Statement of Cash Flows,
              three months ended December 31, 1997 and 1996                  6

           Notes to Unaudited Consolidated Financial Statements            7-9

  Item 2.  Management's Discussion and Analysis
              of Financial Condition and Results of Operations           10-13


Part II.  Other Information

  Item 4.  Submission of Matters to a Vote of Security Holders              14

  Item 5.  Other Information                                                14

  Item 6.  Exhibits and Reports on Form 8-K                                 14

           Signature Page                                                   15






                                       2

<PAGE>



                          Williams Controls Inc.

                        Consolidated Balance Sheet
      (Dollars in thousands, except share and per share information)


                                              
                                                 December 31,     September 30,
                                                   1997               1997
                                                (unaudited)
                                               --------------  ---------------
                 ASSETS
Current Assets:
   Cash and cash equivalents                  $       961     $        700
   Trade and other accounts receivable, less
    allowance of $127 and $185 at December 31        
    and September 30, respectively                  8,682            8,468
   Inventories                                     14,717           14,517
   Prepaid expenses                                 1,181              713
   Net assets held for disposition                    307              638
   Other current assets                             1,098            1,098
                                               --------------  ---------------
     Total current assets                          26,946           26,134

Investment in affiliate                               201              559
Property plant & equipment, net                    17,644           18,080
Receivables from affiliate                          3,611            3,645
Net assets held for disposition                     1,919            1,610
Other assets                                        1,321            1,348
                                               ---------------  --------------
     Total assets                              $   51,642       $   51,376
                                               ==============  ===============

  LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
   Accounts payable                            $    5,719       $    5,070
   Accrued expenses                                 2,599            3,008
   Current portion of long-term debt                
    and capital leases                              1,425            1,428
   Estimated loss on disposal                         109              500
                                               --------------   --------------
      Total current liabilities                     9,852           10,006

Long-term debt and capital lease 
 obligations                                       22,427           22,857

Other liabilities                                   1,331            1,215

Commitments and contingencies                           -                -

Minority interest in consolidated                     
subsidiaries                                          442              463

Shareholders' equity:
   Preferred stock ($.01 par value,                     -                -
    50,000,000 authorized)
   Common   stock   ($.01   par   value,
    50,000,000 authorized;18,062,240 and 
    17,912,240  issued at December 31, 1997
    and September 30,1997, respectively)              180              179
   Additional paid-in capital                       9,882            9,822
   Retained earnings                                8,096            7,402
   Unearned ESOP shares                              (191)            (191)
   Treasury stock (130,200 and 195,200
    shares at December 31, 1997
    and September 30, 1997, respectively)            (377)            (377)
                                               --------------   --------------
   Total shareholders' equity                      17,590           16,835
                                               ==============   ==============
    Total liabilities and shareholders'equity $    51,642      $    51,376
                                               ==============   ==============





       The accompanying notes are an integral part of these statements.



                                       3
<PAGE>




                             Williams Controls, Inc.
                Consolidated Statement of Shareholders' Equity
                             (Dollars in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
 
                                    Issued
                                 Common stock       
                               ------------------      Additional   Retained     Unearned   Treasury   Shareholders'
                                Shares     Amount        Paid in     Earnings      ESOP      Shares      Equity
                                                         Capital                  Shares
                              ----------------------------------------------------------------------------------------
<S>                           <C>          <C>          <C>           <C>       <C>         <C>         <C>

Balance, September 30, 1997   17,912,240   $    179      $ 9,822       $7,402   $    (191)  $    (377)   $ 16,835

Net earnings                           -          -            -          694           -           -         694
Common stock issued
 pursuant to exercise
 of warrant/options              150,000          1           60            -           -           -          61
                              ---------------------------------------------------------------------------------------
Balance, December 31, 1997    18,062,240   $    180       $ 9,882       $8,096   $    (191)  $   (377)   $ 17,590
                              =======================================================================================

</TABLE>






           The accompanying notes are an integral part of these statements.

                                       4
<PAGE>


                           Williams Controls, Inc.
                      Consolidated Statement of Operations
         (Dollars in thousands, except share and per share information)
                                   (unaudited)

                                               Three months    Three months
                                                Ended          Ended
                                                December        December
                                                31, 1997        31, 1996
                                              --------------  -------------

Sales                                           $    14,944    $    13,521
Cost of sales                                        10,789         10,136
                                              --------------  -------------
Gross margin                                          4,155          3,385

Operating expenses:
  Research and development                              559            471
  Selling                                               691            676
  Administration                                      1,078            909
                                              --------------  -------------
    Total operating expenses                          2,328          2,056
                                              --------------  -------------

Earnings from continuing operations                   1,827          1,329

Other expenses:
   Interest expense                                     376            517
   Equity interest in loss of affiliate                 358            130
                                              --------------  -------------
     Total other expenses                               734            647
                                              --------------  -------------


Earnings from  continuing  operations  before        
  income tax expense                                  1,093            682
Income tax expense, net                                 421            272
                                              --------------  -------------
Earnings from  continuing  operations  before         
 minority interest                                      672            410
Minority  interest in net (earnings)  loss of          
consolidated subsidiaries                                22           (18)
                                              --------------  -------------

Net earnings from continuing operations                 694            392

Discontinued operations:
   Loss from operations of automotive
   accessories segment                                    -          (380)
                                              --------------  -------------
   Loss from discontinued operations                      -          (380)
                                              --------------  -------------


Net earnings                                    $       694   $         12
                                              ==============  =============


Basic and diluted  earnings  per common share   
from continuing operations                      $      0.04   $       0.02
Basic and diluted  loss per common share from   
discontinued operations                                   -   $     (0.02)
                                              --------------  -------------
Basic and  diluted  net  earnings  per common   
share                                           $      0.04   $       0.00
                                              ==============  =============




       The accompanying notes are an integral part of these statements.

                                       5
<PAGE>



                             Williams Controls, Inc.
                    Consolidated Statements of Cash Flows
                             (Dollars in thousands)
                                 (unaudited)

                                                Three months     Three months
                                                   Ended            Ended
                                                December 31,      December 31,
                                                   1997              1996
                                               -------------   --------------
Cash flows from operating activities:
  Net income                                         $ 694          $   12
Adjustments to reconcile net income to net
 cash from continuing operations:
  Loss from discontinued operations                      -             380
  Depreciation and amortization                        360             343
  Minority  interest  in  earnings (loss) of
  consolidated subsidiaries                           (22)              18
  Equity interest in loss of affiliate                 358             130
Changes in working capital of continuing
operations:
  Receivables                                        (180)             124
  Inventories                                          128             246
  Accounts payable and accrued expenses                240         (2,082)
  Prepaid expenses and other                         (467)           (530)
                                              -------------  --------------
  Net cash  provided  by (used in)  operating
  activities of continuing operations                1,111         (1,359)

Cash flows from investing activities:
  Payments for property, plant and equipment         (239)           (173)
                                              -------------  --------------
Net cash used for investing activities of      
continuing operations                                (239)           (173)  

Cash flows from financing activities:
  Repayments  of  long-term  debt and capital        
  lease obligations                                  (400)            (40)
  Proceeds from issuance of common stock                61
                                              -------------  --------------
Net cash provided by financing activities of     
 continuing operations                               (339)            (40)

Net cash provided by (used in) discontinued          
 operations                                          (272)           1,869

Net increase in cash and cash equivalents              261             297

Cash and cash equivalents at beginning of         
 period                                                700           1,379
                                               -------------  --------------
  Cash and cash equivalents at end of period       $   961       $   1,676
                                               =============  ==============



        The accompanying notes are an integral part of these statements.

                                       6

<PAGE>



                             Williams Controls, Inc.
              Notes to Unaudited Consolidated Financial Statements
            Three Months ended December 31, 1997 and 1996 (Dollars in
                      thousands, except per share amounts)

Cautionary Statement: This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, those statements relating to development
of new products, the financial condition of the Company, the ability to increase
distribution  of the Company's  products,  integration of businesses the Company
acquires,  disposition  of any current  business of the Company,  including  its
Kenco division. These forward-looking statements are subject to the business and
economic risks faced by the Company.  The Company's  actual results could differ
materially  from those  anticipated  in these  forward-looking  statements  as a
result of the factors described above and other factors  described  elsewhere in
this report.

1.   Organization

Williams Controls,  Inc.,  including its wholly-owned  subsidiaries,  Williams
Controls  Industries,  Inc.  ("Williams");  Aptek  Williams,  Inc.  ("Aptek");
Premier  Plastic  Technologies,   Inc.  ("PPT");  Williams  Automotive,  Inc.;
GeoFocus,   Inc.  ("GeoFocus");   NESC  Williams,   Inc.  ("NESC");   Williams
Technologies,  Inc.  ("Technologies");  Williams  World Trade,  Inc.  ("WWT");
Kenco/Williams,  Inc.  ("Kenco");  Techwood  Williams,  Inc. ("TWI");  Agrotec
Williams,  Inc.  ("Agrotec") and its 80% owned  subsidiaries  Hardee Williams,
Inc. ("Hardee") and Waccamaw Wheel Williams,  Inc. ("Waccamaw") is hereinafter
referred to as the "Company" or "Registrant."

2.   Interim Consolidated Financial Statements

The interim consolidated  financial statements have been prepared by the Company
and, in the opinion of management,  reflect all material  adjustments  which are
necessary  to a fair  statement  of results for the interim  periods  presented.
Certain  information  and footnote  disclosure made in the last annual report on
Form  10-K  have  been  condensed  or  omitted  for  the  interim   consolidated
statements.  Certain  costs are  estimated  for the full year and  allocated  to
interim   periods  based  on  activity   associated  with  the  interim  period.
Accordingly,  such costs are subject to year-end adjustment. It is the Company's
opinion that, when the interim  consolidated  statements are read in conjunction
with the  September  30, 1997 annual report on Form 10-K,  the  disclosures  are
adequate  to  make  the  information  presented  not  misleading.   The  interim
consolidated  financial  statements  include the accounts of the Company and its
subsidiaries.  All significant inter-company accounts and transactions have been
eliminated.

3.   Earnings (loss) per Share

As required, the Company adopted Statement of Financial Accounting Standards No.
128 during the quarter ended  December 31, 1997.  This  statement  requires dual
presentation of basic and diluted earnings per share (EPS) with a reconciliation
of the  numerator  and  denominator  of the EPS  computations.  Basic  per share
amounts are based on the weighted  average  shares of common stock  outstanding.
Diluted  earnings per share assume the  conversion,  exercise or issuance of all
potential  common stock  instruments  such as options,  warrants and convertible
securities,  unless  the  effect is to reduce a loss or  increase  earnings  per
share.  Accordingly,   this  presentation  has  been  adopted  for  all  periods
presented.  The basic and diluted  weighted  average shares  outstanding  are as
follows:

                                          Three Months      Three Months
                                             Ended             Ended
                                         December 31,       December 31,
                                             1997               1996
                                        ---------------   ---------------

Weighted average shares outstanding      17,832,040           17,674,787
   Less unallocated ESOP shares              86,000              140,000
                                     ---------------      ---------------
Weighted average outstanding shares
used for basic EPS                       17,746,040           17,534,787
   Plus incremental shares from
   assumed issuance of stock              
   options and other contingent
   issuances                                753,960              465,213
                                     ---------------      ---------------
Weighted average outstanding shares
used for diluted EPS                     18,500,000           18,000,000
                                     ===============      ===============


                                      7

<PAGE>

                             Williams Controls, Inc.
              Notes to Unaudited Consolidated Financial Statements
            Three Months ended December 31, 1997 and 1996 (Dollars in
                      thousands, except per share amounts)

4.    Year 2000 Conversion

The Company  recognizes the need to ensure its operations  will not be adversely
impacted by Year 2000  software  failures.  Software  failures due to processing
errors  potentially  arising  from  calculations  using the Year 2000 date are a
known  risk.  The  Company  is  addressing  this  risk to the  availability  and
integrity of financial  systems and the reliability of the operational  systems.
The Company has established  processes for evaluating and managing the risks and
cost  associated  with this problem,  including  communicating  with  suppliers,
dealers  and  others  with  which  it does  business  to  coordinate  Year  2000
conversion.  The total cost of compliance and its effect on the Company's future
results of  operations is being  determined  as part of the detailed  conversion
planning process.

5.   Inventories

Inventories consisted of the following:
                                         December 31,     September 30,
                                           1997               1997
                                        ------------       ------------

  Raw material                             $  9,130           $ 8,173
  Work in process                             1,679             2,035
  Finished goods                              3,908             4,309
                                        ------------      ------------
                                          $  14,717           $14,517
                                        ============      ============


Finished goods include component parts and finished product ready for shipment.

6.   Sale Leaseback

In April 1997 the Company sold its Portland,  Oregon manufacturing facility in a
sale-leaseback  transaction for $4,524, less $250 withheld in an escrow fund for
possible  environmental cleanup costs. The Company may be required to repurchase
the property within one year if it cannot cure possible  environmental  problems
at the sold  property  and may be  required to finance  part of the  purchaser's
price in the second or third  quarter  of fiscal  1998 if the  purchaser  cannot
obtain  permanent  financing  from a lender who would  accept the  environmental
condition of the property. The acquisition agreement between the Company and the
previous  building  owner  contains   provisions  for   indemnification  of  any
environmental  cleanup costs after the Company  spends $25 towards such cleanup.
The Company  intends to seek  indemnification  from the prior property owner for
permanent monitoring or cleanup costs, if any.

The  purchaser  previously  informed  the  Company  that it had  entered  into a
purchase and sale  agreement  with a third party who would purchase the building
without  any  contingent  repurchase  obligation  subject  to  third  party  due
diligence.  In January,  1998, the purchaser informed the Company that the third
party declined to purchase the building.


                                       8
<PAGE>


                             Williams Controls, Inc.
              Notes to Unaudited Consolidated Financial Statements
            Three Months ended December 31, 1997 and 1996 (Dollars in
                      thousands, except per share amounts)

7.    Segment Information
<TABLE>
<CAPTION>

                                                                  
                                                       Three months        Three months
                                                          Ended                Ended
                                                       December 31,         December 31,
                                                          1997                  1996
                                                      --------------       -------------    
<S>                                                  <C>                   <C> 

Net sales by classes of similar  products  from
 continuing operations

Vehicle components                                         $ 11,697             $ 9,464
Agricultural equipment                                        2,247               3,104
Electrical components and GPS                                 1,000                 953
                                                             -------            --------     
                                                             14,944              13,521
                                                             =======            ========
Earnings (loss) from continuing operations

Vehicle components                                            2,394               1,337
Agricultural equipment                                        (177)                 212
Electrical components and GPS                                 (390)               (220)
                                                             -------            --------
                                                              1,827               1,329
                                                             =======            ========
Identifiable assets

Vehicle components                                           21,975              19,457
Agricultural equipment                                       10,541              13,114
Electrical components and GPS                                 8,388               7,583
                                                             -------            --------
Total assets - continuing operations                         40,904              40,154
Automotive accessories-discontinued operations               10,738              12,836
                                                             -------            --------
Total assets                                                 51,642              52,990
                                                             =======            ========

Capital expenditures

Vehicle components                                               45                  65
Agricultural equipment                                          109                  76
Electrical components and GPS                                    85                  32
                                                             --------           --------
Total capital expenditures-continuing operations                239                 173
Automotive accessories-discontinued operations                   38                  50
                                                             --------           --------
Total capital expenditures                                      277                 223
                                                             ========           ======== 

Depreciation and amortization

Vehicle components                                              230                 215
Agricultural equipment                                           50                  67
Electrical components and GPS                                    80                  61
                                                             --------           --------
Total depreciation and amortization-
 continuing operations                                          360                 343
Automotive accessories-discontinued operations                   59                  54
                                                             --------           --------
Total depreciation and amortization                          $  419              $  397
                                                             ========           ========



</TABLE>



                                       9

<PAGE>


                             Williams Controls, Inc.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                (Dollars in thousands, except per share amounts)


See "Cautionary Statement" contained at the beginning of this report.


Financial Condition, Liquidity and Capital Resources

The  Company's  principal  sources of  liquidity  during the three  months ended
December 31, 1997 were funds  generated  from  continuing  operations  of $1,111
compared  to cash used in  operations  of $1,359  for the same  period in fiscal
1997. At December 31, 1997 the  Company's  working  capital  improved to $17,094
compared to $16,128 at  September  30, 1997.  The current  ratio at December 31,
1997 also improved to 2.7 compared to 2.6 at September 30, 1997.

The  Company  used cash for  discontinued  operations  of $272  during the first
quarter  ended  December  31,  1997  compared to cash  provided by  discontinued
operations  of $1,869  for the first  quarter  in  fiscal  1997.  Cash flow from
discontinued  operations  decreased due to operating  losses in the current year
quarter.  The prior year quarter  benefited from higher  collections of accounts
receivable and inventory reductions.

The Company  anticipates  that cash  generated  from  continuing  operations and
borrowings  will be sufficient  to satisfy  working  capital for its  continuing
operations;  however,  the Company  will  require  additional  financing to fund
certain research and development projects, an additional investment in Ajay, new
equipment purchases and moving of the PPT facility. The Company intends to raise
the additional  capital through the sale of Kenco, which is expected to occur in
the  second  quarter of fiscal  1998,  a  possible  sale/leaseback  of its Aptek
manufacturing  and research  facility in Deerfield Beach,  Florida and a private
placement  or public  offering of common or preferred  stock.  The Company is in
discussions with investment bankers regarding these transactions; however, there
is no assurance  that the Company can raise new capital on terms  acceptable  to
the Company.  The Company had $1,505 of loan  availability  under the  revolving
loan as of December 31, 1997.

The proceeds of the sale of Kenco are expected to be approximately  $1,600 and a
$1,500 retained equity  investment in the acquiring  company plus the assumption
of certain liabilities. In addition, the sale of Kenco inventory during the nine
months  following  the sale are  expected to generate  an  additional  $3,000 to
$4,000 of cash. The proceeds from the sale of Kenco, if completed,  will be used
to repay bank debt of approximately  $1,600.  Any excess proceeds from inventory
sales will be used first to repay the $2,340  bridge loan  provided to Ajay by a
previous lender.

In April 1997 the Company sold its Portland,  Oregon manufacturing facility in a
sale-leaseback transaction for $4,524. The Company may be required to repurchase
the property in April 1998 if it cannot cure possible  environmental problems at
the sold property or may be required to finance $3,200 of the purchaser's  price
if the  purchaser  cannot  obtain  permanent  financing  from a lender who would
accept the environmental  condition of the property.  The acquisition  agreement
between the Company and the previous  building  owner  contains  provisions  for
indemnification of any environmental  cleanup costs after the Company spends $25
towards such cleanup. The Company intends to seek indemnification from the prior
property owner for permanent monitoring or cleanup costs, if any.

The  purchaser  previously  informed the Company that it entered into a purchase
and sale agreement  with a third party who would  purchase the building  without
any contingent  repurchase  obligation subject to third party due diligence.  In
January 1998 the purchaser informed the Company that the third party declined to
purchase the building.



                                       10

<PAGE>



                           Williams Controls, Inc.
                   Management's Discussion and Analysis of
                Financial Condition and Results of Operations
               (Dollars in thousands, except per share amounts)


Financial Condition, Liquidity and Capital Resources (continued)

In  fiscal   1997  the   Company   and  Ajay   agreed  to  a  plan  (the   "Ajay
Recapitalization")  whereby  Ajay  plans  to  obtain  permanent  bank  financing
independent  of the  Company's  loan which,  management of Ajay has informed the
Company,  when combined with a final investment by the Company,  would result in
adequate  working capital and eliminate any requirements for further advances or
guarantees from the Company.  Ajay management informed the Company it has signed
a proposal  letter with a lender for an asset based loan,  which Ajay management
informed the Company that it believes  that based on expected loan advance rates
would  result in an  approximately  $2,000  shortfall of its  projected  working
capital  needs.  The  Company  intends  to invest up to $2,000 to  provide  Ajay
adequate working  capital,  of which  approximately  $1,000 would be required no
later than the end of the second quarter of fiscal 1998.

If Ajay successfully completes its bank financing, the Company has also proposed
to exchange up to $4,000 of loans and advances into convertible voting preferred
stock which Ajay  management  has informed  the Company  that it believes  would
allow Ajay to meet the minimum net worth  criteria for continued  listing on the
NASDAQ.  The  preferred  stock  would  pay a  dividend  rate of 9% and  would be
convertible  into up to  12,000,000  shares of Ajay common  stock.  As presently
proposed,  the dividend rate would  increase two  percentage  points each in the
year 2002 and 2003 if Ajay does not achieve pre-tax earnings of at least $500 in
the two consecutive years prior to 2002 and 2003. The Company has also agreed to
purchase  in  fiscal  1998  approximately  $1,000  of notes  payable  by Ajay to
affiliated  parties  which  had  provided  loans  to Ajay to help  Ajay  finance
operations during the financial  restructuring;  such notes payable have not yet
been purchased.


                                       11
<PAGE>


                             Williams Controls, Inc.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                (Dollars in thousands, except per share amounts)

Results of Operations
Three months ended December 31, 1997 compared to the three months ended December
31, 1996

Overview

Net sales from  continuing  operations  increased 10.5% to $14,944 for the first
quarter ended  December 31, 1997 from $13,521 in the same period in fiscal 1997.
Increased  sales are  attributed  to higher unit sales  volumes in the Company's
vehicle component  segment,  which were partially offset by declining unit sales
volumes in the agricultural equipment segment.

Net earnings from  continuing  operations  increased  77.0% to $694 in the first
quarter  of  fiscal  1998  from  $392 in the same  fiscal  1997  quarter  due to
increases in unit sales  volumes in the  Company's  vehicle  component  segment,
which were partially  offset by declining unit sales volumes in the agricultural
equipment  segment and additional  equity  interest in losses of affiliate (Ajay
Sports, Inc.).

Net income increased to $694 in the first quarter of fiscal 1998 from $12 in the
comparable  fiscal  1997  quarter  due to higher  profitability  in the  vehicle
component  segment  and  elimination  of  losses in the  Company's  discontinued
operations which were offset by increased  losses in the Company's  agricultural
equipment  segment and additional  equity  interest in losses of affiliate (Ajay
Sports, Inc.).

Net Sales

Net sales from continuing operations in the vehicle components segment increased
23.6% to $11,697 in the first  quarter of fiscal 1998 compared to $ 9,464 in the
same quarter in fiscal 1997.  Sales  increases were due to higher ETC unit sales
volumes in the Class 7 and 8 truck OEM markets.  Sales  increases in the vehicle
component  segment were  partially  offset by decreases in sales of 27.6% in the
Company's  agricultural  equipment  segment.  Sales declines in the agricultural
equipment segment are attributed primarily to excess dealer inventory.

Gross margin

Gross margin from continuing  operations  increased 22.7% to $4,155 in the first
quarter in fiscal 1998  compared to the prior year  quarter.  Gross margins as a
percentage  of net sales  from  continuing  operations  were  27.8% in the first
quarter of fiscal 1998 and 25.0% in the same fiscal 1997  quarter.  Increases in
dollar amount in the first quarter of fiscal 1998 resulted primarily from higher
unit sales  volumes in the  vehicle  component  segment  offset by gross  margin
decreases of 67.2% in the Company's  agricultural equipment segment due to lower
sales volumes.

Operating expenses

Operating  expenses for continuing  operations  increased 13.2% during the first
quarter  ended  December  31, 1997  compared  to amounts in the same  quarter in
fiscal 1997.  Operating  expenses as a percentage  of net sales from  continuing
operations  decreased in the first quarter of fiscal 1998 to 15.6% from 15.2% in
the same fiscal 1997 quarter.  Operating  expenses  increased 11.3% in the first
quarter of fiscal 1998 in the vehicle  component  segment to $1,305 and 61.6% in
the  electronic  components  and GPS  segment to $564.  Increases  in  operating
expenses  were  attributed  to higher sales volumes of the Company's ETC and GPS
products.  Operating  expenses  decreased  14.0% in the  agricultural  equipment
segment  to $459  compared  to  amounts  in the first  quarter  of fiscal  1997.
Decreases in this segment are attributed to lower sales volumes.

                                       12
<PAGE>
  
                             Williams Controls, Inc.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                (Dollars in thousands, except per share amounts)

Results of Operations (continued)

Research and development  expenses for continuing  operations increased 18.7% to
$559  during the first  quarter of fiscal  1998  compared to amounts in the same
quarter in fiscal 1997. As a percentage of net sales from continuing operations,
research  and  development  expenses  increased  to 3.7% from 3.5%.  In 1997 the
Company curtailed  research and development  activities in all business segments
during the Company's bank refinancing negotiations in fiscal 1997.

Selling expenses for continuing  operations  increased 2.2% to $691 in the first
quarter of fiscal 1998  compared to amounts in the same  quarter in fiscal 1997.
Selling  expenses  as a  percentage  of net  sales  from  continuing  operations
decreased  to 4.6% in the first  quarter of fiscal 1998  compared to 5.0% in the
same 1997 quarter.  Selling  expenses  decreased as a percentage of sales due to
increased sales volumes in the vehicle components segment.

General and administrative expenses for continuing operations increased 18.6% in
the first  quarter  of fiscal  1998 to $1,078  compared  to  amounts in the same
quarter in fiscal 1997. General and  administrative  expenses as a percentage of
net sales from continuing  operations  increased to 7.2% in the first quarter of
fiscal  1998  from  6.7% in the same  quarter  in fiscal  1997.  Increases  were
primarily  due to  additional  personnel  required for current and future growth
activities.

Earnings from continuing operations

Earnings from continuing  operations  increased $498, or 37.5%, to $1,827 in the
first  quarter of fiscal 1998 from $1,329 in the same quarter of fiscal 1997 due
to a $1,057 increase in operating  income in the automotive  components  segment
offset by a $389  decrease  in the  agricultural  equipment  segment  and a $170
decrease in the electrical components and GPS business segments.

Other Expenses

Other expenses  increased 13.4% to $734 in the first quarter of fiscal 1998 from
$647 in the same quarter of fiscal 1997.  Increases were primarily attributed to
increased equity interest in losses of affiliate (AJAY Sports, Inc.).

Discontinued operations

Net losses from the discontinued automotive accessories segment were $391 net of
tax benefits of $201 for the first quarter ended December 31, 1997,  compared to
$582 net of tax benefits of $302 in the same  quarter of fiscal 1997.  Estimated
future  losses  from  discontinued  operations  were  accrued  in  fiscal  1997;
therefore, there was no net loss effect in the first quarter of 1998.

Net sales from the discontinued  segment  declined $1,581,  or 50%, in the first
quarter of fiscal 1998 to $1,582  compared to levels achieved in the fiscal 1997
quarter.  The decline in automotive  accessory sales was due to lower unit sales
and lower prices  resulting from strong  downward  price  pressure  generated by
competitors  who are more  vertically  integrated and have lower cost structures
than the Company's automotive accessories segment.

At  December  31,  1997 the  Company  had  estimated  losses on disposal of $109
remaining as a current liability. The Company expects the sale of Kenco to occur
in the second  quarter of fiscal  1998.  The Company may be required to increase
its estimate of losses on disposal if the sale does not occur by that date.

                                       13
<PAGE>




                           Williams Controls, Inc.

                                   Part II


Item 4.  Submission of Matters to a Vote of Security Holders

      None


Item 5.  Other Information

      None


Item 6.  Exhibits and Reports on Form 8-K

      None

                                       14
<PAGE>


                           Williams Controls, Inc.

                                    Signature


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.




                                          WILLIAMS CONTROLS, INC.


                                         /s/Thomas W. Itin
                                         ------------------------------------
                                         Thomas W. Itin, Chairman
                                         President and Chief Executive Officer



                                         /s/Gerard A. Herlihy
                                         -------------------------------------
                                         Gerard A.  Herlihy,  Chief  Financial
                                          Officer










Date: February 13, 1998