================================================================================

                                  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, 1998.

                                       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, 1999: 18,338,588


<PAGE>

                             Williams Controls, Inc.

                                      Index


                                                                           Page
                                                                          Number
                                                                          ------
Part I.  Financial Information

  Item 1.       Financial Statements

                Consolidated Balance Sheets, December 31, 1998 
                   (unaudited) and September 30, 1998                        1

                Unaudited Consolidated Statements of Operations,
                   three months ended December 31, 1998 and 1997             2

                Unaudited Consolidated Statements of Cash Flows,
                 three months ended December 31, 1998 and 1997               3

                Notes to Unaudited Consolidated Financial Statements        4-6

  Item 2.       Management's Discussion and Analysis
                   of Financial Condition and Results of Operations        7-10


Part II.  Other Information

  Item 1.      Legal Proceedings                                            11

  Item 2.      Changes in Securities and Use of Proceeds                    11

  Item 3.      Defaults Upon Senior Securities                              11

  Item 4.      Submission of Matters to a Vote of Security Holders          11

  Item 5.      Other Information                                            11

  Item 6.      Exhibits and Reports on Form 8-K                             11

                    Signature Page                                          12

<PAGE>
                                     Part I

Item 1.
                             Williams Controls Inc.
                           Consolidated Balance Sheets
         (Dollars in thousands, except share and per share information)

<TABLE>
<CAPTION>
<S>                                                                  <C>                    <C>

                                                                          December 31,           September 30,
                                                                             1998                    1998
                                                                     --------------------    --------------------
                          ASSETS
                          ------
Current Assets:
   Cash and cash equivalents                                         $          1,251        $          1,281
   Trade and other accounts receivable, less allowance of $337 and
     $325 at September 30, 1998 and December 31, 1998,                         10,631                  11,765
     respectively
   Inventories                                                                 10,229                  10,693 
   Deferred taxes and other                                                     2,470                   2,231
   Net assets held for disposition                                              4,732                   5,117
                                                                     --------------------    --------------------
     Total current assets                                                      29,313                  31,087

   Property plant & equipment, net                                             20,324                  20,013
   Investment in and note receivable from affiliate                             5,950                   6,140
   Note receivable                                                                  -                   3,200
   Net assets held for disposition                                              1,821                   1,847
   Other assets                                                                 4,092                   4,072
                                                                     ====================    ====================
     Total assets                                                    $         61,500        $         66,359
                                                                     ====================    ====================

           LIABILITIES AND SHAREHOLDERS' EQUITY
           ------------------------------------

Current Liabilities:
   Accounts payable                                                  $         3,920         $         4,771
   Accrued expenses                                                            2,505                   3,399
   Current portion of long-term debt and capital leases                        1,114                   1,181
   Estimated loss on disposal                                                  2,092                   2,550
                                                                     --------------------    -------------------
      Total current liabilities                                                9,631                  11,901

Long-term debt and capital lease obligations                                  24,120                  27,846

Other liabilities                                                              2,272                   2,201

Commitments and contingencies

Shareholders' equity:
   Preferred stock ($.01 par value, 50,000,000 authorized;                         
      80,000 issued and outstanding)                                               1                       1
   Common stock ($.01 par value, 50,000,000 authorized;
      18,468,788 and 18,311,288 issued at December 31,
      1998 and  September 30, 1998, respectively)                                184                     183
   Additional paid-in capital                                                 18,101                  17,917
   Retained earnings                                                           8,325                   7,444
   Unearned ESOP shares                                                         (73)                    (73)
   Treasury stock (130,200 shares at December 31, 1998
      and September 30, 1998)                                                  (377)                   (377)
   Note receivable                                                             (500)                   (500)
   Pension liability adjustment                                                (184)                   (184)
                                                                     --------------------     -------------------
      Total shareholders' equity                                              25,477                  24,411
                                                                     ====================     ===================
        Total liabilities and shareholders' equity                   $        61,500          $       66,359
                                                                     ====================     ===================

</TABLE>







      The accompanying notes are an integral part of these balance sheets.

                                       1
<PAGE>
                             Williams Controls, Inc.
                      Consolidated Statements of Operations
         (Dollars in thousands, except share and per share information)

<TABLE>
<CAPTION>
<S>                                                                     <C>                <C>   

                                                                         Three months          Three months
                                                                             Ended                ended
                                                                         Dec 31, 1998          Dec 31, 1997
                                                                        ----------------     -----------------

Sales                                                                       $    14,925           $    12,698
Cost of sales                                                                    10,226                 8,825
                                                                        ----------------     -----------------
Gross margin                                                                      4,699                 3,873

Operating expenses:
  Research and development                                                          773                   558
  Selling                                                                           497                   488
  Administration                                                                  1,105                   823
                                                                        ----------------     -----------------
    Total operating expenses                                                      2,375                 1,869
                                                                        ----------------     -----------------

Earnings  from continuing operations                                              2,324                 2,004

Other expenses:
   Interest expense, net                                                            348                   270
   Other (income) expense                                                           112                   (6)
   Equity interest in loss of affiliate                                             190                   358
                                                                        ----------------     -----------------
     Total other expenses                                                           650                   622
                                                                        ----------------     -----------------


Earnings from continuing operations before income tax expense                     1,674                 1,382
Income tax expense                                                                  643                   531
                                                                        ----------------     -----------------

Net earnings from continuing operations                                           1,031                   851

Discontinued operations:
  Net loss from operations of the agricultural equipment segment                      -                 (157)
                                                                        ----------------     -----------------
Net earnings                                                                      1,031                   694

Dividends on preferred stock                                                        150                     -
                                                                        ----------------     -----------------

Net earnings allocable to common shareholders                               $       881          $        694
                                                                        ================     =================

Earnings per common share from continuing operations - basic                $      0.05          $       0.05
Loss per common share from discontinued operations - basic                            -                (0.01)
                                                                        ----------------     -----------------
Net earnings per common share - basic                                       $      0.05          $       0.04
                                                                        ================     =================
Weighted average shares used in per share calculation - basic                18,248,760            17,816,294
                                                                        ================     =================

Earnings per common share from continuing operations - diluted              $      0.05           $      0.05
Loss per common share from discontinued operations - diluted                          -                (0.01)
                                                                        ----------------     -----------------
Net earnings per common share - diluted                                     $      0.05           $      0.04
                                                                        ================     =================
Weighted average shares used in per share calculation - diluted              21,312,041            18,392,485
                                                                        ================     =================


</TABLE>

        The accompanying notes are an integral part of these statements.

                                       2


<PAGE>
                             Williams Controls, Inc.
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)

<TABLE>
<CAPTION>
<S>                                                                    <C>                    <C> 

                                                                           Three months           Three months
                                                                              Ended                  Ended
                                                                        December 31, 1998      December 31, 1997
                                                                        ------------------    -------------------
Cash flows from operating activities:
  Net earnings                                                              $       1,031         $          694
Adjustments to reconcile net earnings to net cash from continuing
operations:
  Loss from discontinued operations                                                     -                    157
  Depreciation and amortization                                                       384                    310
  Equity interest in loss of affiliate                                                190                    358
Changes in working capital of continuing operations:
  Receivables                                                                       1,244                    232
  Inventories                                                                         464                  (600)
  Accounts payable and accrued expenses                                           (1,855)                    202
  Other                                                                              (78)                     80
                                                                        ------------------    -------------------
  Net cash provided by operating activities of continuing operations               1,380                   1,433


Cash flows from investing activities:
  Payments for property, plant and equipment                                        (695)                  (130)
                                                                        ------------------    -------------------
Net cash used in investing activities of continuing operations                      (695)                  (130)


Cash flows from financing activities:
  Repayments of long-term debt and capital lease obligations                      (3,093)                  (450)
  Borrowing under term notes                                                        2,500                     -
  Preferred dividends                                                               (150)                     -
  Proceeds from issuance of common stock                                               75                     61
                                                                        ------------------    ---------------------
Net cash used in financing activities of continuing operations                      (668)                  (389)

Net cash used in discontinued operations                                             (47)                  (653)

Net increase (decrease) in cash and cash equivalents                                 (30)                   261

Cash and cash equivalents at beginning of period                                    1,281                   700
                                                                        ==================    =====================
Cash and cash equivalents at end of period                                  $       1,251        $          961
                                                                        ==================    =====================

Supplemental disclosure of cash flow information:
                                                                        ==================    =====================
  Interest paid                                                             $         486        $          432
  Income taxes paid, (refunded)                                             $         347        $          (5)
                                                                        ==================    =====================
</TABLE>







        The accompanying notes are an integral part of these statements.


                                       3
<PAGE>
                             Williams Controls, Inc.
              Notes to Unaudited Consolidated Financial Statements
                  Three Months ended December 31, 1998 and 1997
                (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
Agricultural  segment.  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  unaudited  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.   The  interim  results  are  not
       necessarily  indicative  of the results  expected  for the entire  fiscal
       year. 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,
       1998 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 intercompany accounts and transactions have been eliminated.

3.     Comprehensive Income (Loss)

       In June 1997,  the  Financial  Accounting  Standards  Board (FASB) issued
       Statement  of  Financial  Accounting  Standards  (SFAS)  130,  "Reporting
       Comprehensive  Income",  which requires  companies to report a measure of
       all changes in equity except those  resulting from  investments by owners
       and  distributions to owners.  Total  comprehensive  income for the three
       months   ended   December   31,  1998  and  1997  was  $1,031  and  $694,
       respectively,  and consisted  solely of net earnings.  As of December 31,
       1998,  accumulated  other  comprehensive  loss was $184 and  consisted of
       pension liability adjustment.

4.     Earnings (loss) per Share

       Effective  in its fiscal  year ended  September  30,  1998,  the  Company
       adopted SFAS 128, "Earnings Per Share". SFAS 128 prescribes new Basic and
       Diluted  Earnings  Per Share (EPS)  calculations  that replace the former
       calculations  for Primary and Fully Diluted EPS.  Prior periods have been
       restated  to  conform  to the  requirements  of SFAS  128.  Basic  EPS is
       calculated using the weighted average number of common shares outstanding
       for the period and diluted EPS is calculated  using the weighted  average
       number  of  common   shares  and  dilutive   common   equivalent   shares
       outstanding.


                                       4
<PAGE>
       The calculation of weighted average shares is as follows:

<TABLE>
<CAPTION>
       <S>                                                     <C>                     <C>
     
                                                         Quarter Ended                 Quarter Ended
                                                       December 31, 1998             December 31, 1997
                                                      --------------------          --------------------

         Weighted average shares outstanding                18,248,760                   17,816,294
         Effect of dilutive securities-
            Stock options and warrants                         154,190                      176,191
            Expected share issuance pursuant to
               an agreement                                          -                      400,000
            Convertible preferred stock                      2,909,091                            -
                                                      --------------------          --------------------
         Diluted shares outstanding                         21,312,041                   18,392,485
                                                      ====================          ====================
</TABLE>

       For purposes of diluted EPS, the  dividends on preferred  stock are added
       back to net earnings allocable to common shareholders.


5.     Inventories

       Inventories consisted of the following:

                                       December 31,            September 30,
                                          1998                     1998
                                   -------------------      -------------------

         Raw material                 $    5,122                $    5,152
         Work in process                   1,965                     1,333
         Finished goods                    3,142                     4,208
                                   -------------------      -------------------
                                       $  10,229                 $  10,693
                                   ===================      ===================

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

6.     Sale Leaseback and Financing

       In  April  1997  the  Company  sold its  Portland,  Oregon  manufacturing
       facility in a sale-leaseback  transaction for approximately  $4,600.  The
       transaction  was accounted for as a financing and the  capitalized  lease
       obligations   of   approximately   $4,600  were  recorded  as  long  term
       liabilities. In April 1998, under the terms of the agreement, the Company
       provided a mortgage  note to the  purchaser in the amount of $3,200 which
       was  reported as a note  receivable  at September  30, 1998.  In December
       1998,  the Company  exercised  an option to  repurchase  the building for
       $4,700,  consisting of cash of $1,500 and the note  receivable of $3,200.
       Accordingly,  the  note  receivable  of  $3,200  and  the  capital  lease
       obligation  of $4,600  have been  eliminated  from the  balance  sheet at
       December 31, 1998. The costs associated with the building  repurchase are
       reported in other expenses during the quarter ended December 31, 1998.

       The Company  borrowed  $2,500 from its bank under  amended  term loans to
       finance the  repurchase  transaction  and for working  capital  purposes.
       Approximately  $1,222 of the  additional  financing was borrowed under an
       amendment to the Company's  existing Term Loan I which increased the Term
       Loan I  balance  to  $4,105.  Term  Loan I is  payable  in equal  monthly
       installments of $60 with the remaining  balance of $2,897 due at maturity
       on July 1, 2001.  Approximately  $1,278 of the  additional  financing was
       provided  under an  amended  Term  Loan II  payable  in 18 equal  monthly
       installments of $71, plus variable interest (8.5% at December 31, 1998).



                                       5
<PAGE>
7.     Segment Information
                                                  Three months     Three months
                                                     Ended            Ended
                                                  December 31,     December 31,
                                                     1998             1997
                                                  ------------     ------------
Sales by classes of similar products 
from continuing operations
  Vehicle components                                $ 14,296         $ 11,698
  Electrical components and GPS                          629            1,000
                                                  ------------     ------------
                                                    $ 14,925         $ 12,698
                                                  ============     ============

Earnings (loss) from continuing operations
  Vehicle components                                $  3,142         $  2,394
  Electrical components and GPS                         (818)            (390)
                                                  ------------     ------------
                                                    $  2,324         $  2,004
                                                  ============     ============

Identifiable assets
  Vehicle components                                $ 36,818         $ 28,945
  Electrical components and GPS                        8,177            7,569
  Corporate                                            5,950            3,812
                                                  ------------     ------------
Total assets - continuing operations                  50,945           40,326
  Automotive accessories - discontinued operations     4,002            2,225
  Agricultural equipment - discontinued operations     6,553            5,995
                                                  ------------     ------------
Total assets                                        $ 61,500         $ 48,546
                                                  ============     ============


Capital expenditures
  Vehicle components                                $    655         $     45
  Electrical components and GPS                           40               85
                                                  ------------     ------------
Total capital expenditures - continuing operations       695              130
  Automotive accessories - discontinued operations         -               38
  Agricultural equipment - discontinued operations         -              109
                                                  ------------     ------------
Total capital expenditures                          $    695         $    277
                                                  ============     ============


Depreciation and amortization
  Vehicle components                                $    300         $    230
  Electrical components and GPS                           84               80
                                                  ------------     ------------
Total depreciation and amortization - 
continuing operations                                    384              310
  Automotive accessories - discontinued operations         -               59
  Agricultural equipment - discontinued operations        88               50
                                                  ------------     ------------
Total depreciation and amortization                 $    472         $    419
                                                  ============     ============




The Company has classified the investment in and note  receivable from affiliate
as  a  corporate  asset  under  identifiable  assets.  Identifiable  assets  for
discontinued segments reflect the net assets held for disposition.



                                       6
<PAGE>
Item 2.
                             Williams Controls, Inc.
                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                (Dollars in thousands, except per share amounts)



  Financial Position and Capital Resources
  Financial Condition, Liquidity and Capital Resources
  ----------------------------------------------------

  The Company's  principal  sources of liquidity are borrowings under its credit
  facilities,  leases for equipment purchases from various leasing companies and
  funds generated from operations.  The Company  anticipates that cash generated
  from  operations,  bank  borrowings  and leases will be  sufficient to satisfy
  working capital and capital  expenditure  requirements for current  operations
  for the next twelve  months.  At December  31,  1998,  the  Company's  working
  capital working capital  improved to $19,682  compared to $19,186 at September
  30, 1998 and the current ratio was 3.0 compared to 2.6 at September  30, 1998.
  Cash flows from continuing  operations were $1,380 for the first quarter ended
  December 31, 1998  compared to $1,433 for the first quarter in fiscal 1998. In
  the quarter ended December 31, 1998,  increased earnings and funds provided by
  lower  inventory and accounts  receivable  levels were used to reduce accounts
  payable and accrued expenses. The Company's discontinued  operations used cash
  of $47 and $653  for the  three  months  ended  December  31,  1998 and  1997,
  respectively.  Cash used by discontinued  operations  declined  primarily as a
  result  of  cash  flows  generated  by the Agricultural Equipment segment from
  reduced accounts receivable and inventory in the first quarter of fiscal 1999.
  In addition, the discontinued Automotive Accessories segment used cash of $272
  in the first  quarter of fiscal 1998 and did not use cash in the first quarter
  of fiscal 1999.

  At December 31, 1998  accounts  receivable  decreased  to $10,631  compared to
  $11,765 at September 30, 1998,  primarily as a result of collection of tooling
  accounts receivable at the plastic injection molding  subsidiary.  At December
  31,  1998 long term  debt and  capital  leases  decreased  $3,793 to  $25,234,
  compared to $29,027 at September 30, 1998, due primarily to elimination of the
  capital lease of $4,600 as discussed below.

  In April 1997 the Company sold its Portland,  Oregon manufacturing facility in
  a sale-leaseback  transaction for $4,600. The transaction was accounted for as
  a financing and the capitalized  lease  obligations of $4,600 were recorded as
  long term  liabilities.  In April 1998, under the terms of the agreement,  the
  Company  provided a  mortgage  note to the  purchaser  in the amount of $3,200
  which was reported as a note  receivable  at September  30, 1998.  In December
  1998,  the  Company   exercised  a  repurchase  option  on  the  property  and
  repurchased the building for $4,700  consisting of cash of $1,500 and the note
  receivable  of  $3,200.  Accordingly,  the note  receivable  of $3,200 and the
  capital lease obligation of $4,600 have been eliminated from the balance sheet
  at December 31, 1998.  The costs  associated  with the building  repurchase is
  reported in other expenses during the quarter ended December 31, 1998.

  The Company  borrowed $2,500 from its bank under amended term loans to finance
  the repurchase  transaction  and for working capital  purposes.  Approximately
  $1,222 of the  additional  financing  was  borrowed  under an amendment to the
  Company's existing Term Loan I which is payable in equal monthly  installments
  of $60 with the  remaining  balance of $2,897 due at maturity on July 1, 2001.
  Approximately $1,278 of the additional financing was provided under an amended
  Term Loan II payable in 18 equal  monthly  installments  of $71, plus variable
  interest (8.5% at December 31, 1998).

  Recent FASB Pronouncements - The Financial Accounting Standards Board ("FASB")
  recently issued SFAS No. 131, "Disclosures about Segments of an Enterprise and
  Related  Information".  This statement is effective for fiscal years beginning
  after December 15, 1997. SFAS No. 131 revises existing standards for reporting
  information  about  operating  segments and requires the reporting of selected
  information  in  interim  financial  reports.  SFAS No.  131 also  establishes
  standards for related  disclosures  about  products and  services,  geographic
  areas, and major customers.  Management  believes that  implementation of SFAS
  No. 131 (which  has not been  adopted  with this  quarterly  report)  will not
  materially affect the Company's financial statements.

  In June 1998 the FASB issued Statement of Financial  Accounting  Standards No.
  133,  "Accounting  for Derivative  Instruments and Hedging  Activities  ("SFAS
  133").  SFAS  133  establishes  accounting  and  reporting  standards  for all



                                       7
<PAGE>
  derivative instruments. SFAS 133 is effective for fiscal years beginning after
  June 15,  1999.  The  Company  does not have any  derivative  instruments  and
  accordingly,  the  adoption  of SFAS 133 will have no impact on the  Company's
  financial position or results of operations.


  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.   During  1998,  the  Company  began
  implementing  the  installation  of new  financial  software that is Year 2000
  compliant for the purpose of improving  operations and service to its existing
  and prospective  truck and automotive  customers.  The decision to upgrade the
  Company's  software was made irrespective of Year 2000 compliance  issues. The
  system is expected to be fully  operational in the summer of 1999. The Company
  has contingency  plans in place in the event that the software  implementation
  is delayed.

  Since  January  1998 the  Company  has been  engaged  in  achieving  Year 2000
  compliance. The Company's Year 2000 project is divided into several phases and
  is progressing  with corrective  actions for major systems well under way. All
  hardware,  software, services and business relationships with trading partners
  which could be  affected  by Year 2000 issues are being  audited for Year 2000
  compliance.

  The Company  relies on computer  systems and software to operate its business,
  including  applications  used  in  sales,  purchasing,  inventory  management,
  finance and various administrative  functions. The Company has determined that
  certain of its software applications will be unable to interpret appropriately
  the calendar Year 2000 and subsequent  years.  As of December 31, 1998, 60% of
  the  Company's  systems  are Year 2000  compliant.  The  target  date for full
  compliance is June 30, 1999.

  The  Company's  total budget for its Year 2000 project is $150,  approximately
  half of which amount will be spent through March 1999. This amount  represents
  approximately 17 percent of total IT expenditures budgeted for the period from
  October 1998 through  September 1999. The Company continues to manage total IT
  expenses  by   re-prioritizing   or  curtailing  less  critical   investments,
  incorporating Year 2000 readiness into previously planned system  enhancements
  and by using  existing  staff to implement its Year 2000 program.  The Company
  has hired outside  consultants  for its Year 2000 project,  and it may need to
  purchase additional hardware or software.

  The  Company  acquires a  majority  of its  inventory  from  approximately  22
  vendors.  If these vendors have unresolved Year 2000 issues which affect their
  ability to supply merchandise,  the Company could be adversely  affected.  The
  Company plans to complete a Year 2000  readiness  survey of its top vendors by
  March 1999.  In the event that it appears a vendor will be adversely  affected
  by  Year  2000  issues,  the  Company  believes  that  it will be able to find
  alternative suppliers.

  Should the Company not achieve full  compliance in a timely manner or complete
  its Year 2000  project  within  its  current  cost  estimates,  the  Company's
  business,  financial  condition and results of  operations  could be adversely
  affected.  However,  in the event that the Company fails to meet the deadlines
  above,  the Company  believes that the  financial  impact will not be material
  since all systems  believed by the Company to be critical  are  expected to be
  Year 2000 compliant.







                                       8
<PAGE>
                             Williams Controls, Inc.
                     Management's Discussion and Analysis of
                              Results of Operations
                Three months ended December 31, 1998 compared to
                    the three months ended December 31, 1997

                (Dollars in thousands, except per share amounts)

    Results of Operations
    ---------------------

    Overview
    --------

    Sales from continuing operations increased $2,227, or 18%, to $14,925 in the
    first  quarter of fiscal  1999 from  $12,698 in the first  quarter of fiscal
    1998 due to higher unit sales  volumes in the Company's  Vehicle  Components
    segment.

    Earnings from  continuing  operations  increased  $320, or 16%, to $2,324 in
    fiscal 1999 from $2,004 in fiscal  1998.  The  increase was due to increased
    earnings  from  continuing  operations  of  $748  in the  Company's  Vehicle
    Components  segment  due to higher  unit  sales,  which was offset by higher
    losses from continuing  operations of $428 in the Electrical  Components and
    GPS  segment due  primarily  to $204 of  increased  operating  expenses  for
    research and development and administration incurred for sensor development.
    Net earnings from continuing  operations increased 21%, or $180 in the first
    quarter of fiscal 1999,  primarily as a result of  increased  earnings  from
    continuing  operations  and lower equity loss in affiliate of $168 offset by
    increased interest expense of $78 and other expenses of $118.

    Net earnings allocable to common shareholders were $881 in the first quarter
    of fiscal 1999  compared to $694 in the prior  fiscal year due to  increased
    net earnings from  continuing  operations  offset by preferred  dividends of
    $150 in the first  quarter  of fiscal  1999.  No  preferred  dividends  were
    payable  in the first  quarter of fiscal  1998.  Net  earnings  in the first
    quarter  of fiscal  1998 were  affected  by losses of $157 in the  Company's
    discontinued Agricultural Equipment segment.

    The effective income tax rate was 38.4% for the first quarter ended December
    31, 1998 and 1997.

    Sales
    -----

    Sales from continuing operations in the Vehicle Components segment increased
    $2,598,  or 22%,  to  $14,296 in in the first  quarter  of fiscal  1999 over
    levels  achieved in the first  quarter of fiscal 1998 due to higher ETC unit
    sales.  Sales  from  continuing   operations  in  the  Company's  Electrical
    Components and GPS segments  decreased $371, or 37%, due to lower unit sales
    of electrical components.

    Gross margin
    ------------

    Gross margin from  continuing  operations  increased $826, or 21%, to $4,699
    compared  to $3,873 in the  first  quarter  of  fiscal  1998.  Gross  margin
    increased  $1,050 or 28%, in the first quarter of fiscal 1999 in the Vehicle
    Components  segment  due to  higher  unit  sales  volumes  of ETC  products.
    Increases  in this segment were offset by a decrease in gross margin of $224
    in the Electrical Components and GPS segment. Decreased gross margin in this
    segment  is  attributed  to lower  unit sales  volumes.  Gross  margins as a
    percent of sales  increased  to 31.5% in the first  quarter  of fiscal  1999
    compared to 30.5% in the first quarter of fiscal 1998  primarily as a result
    of improved product mix from higher unit ETC sales.




                                       9
<PAGE>
    Operating expenses
    ------------------

    Operating  expenses for  continuing  operations  increased  $506, or 27%, to
    $2,375 in the first  quarter of fiscal 1999  compared to $1,869 in the first
    quarter of fiscal 1998. Operating expenses as a percentage of net sales from
    continuing operations increased to 15.9% in the first quarter of fiscal 1999
    compared to 14.7% in the first  quarter of fiscal 1998.  Operating  expenses
    increased  $302,  or 23%, in the first quarter of fiscal 1999 in the Vehicle
    Components  segment and $204, or 36%, in the  Electrical  Components and GPS
    segment compared to the prior year quarter.  Increases in operating expenses
    were attributed to higher research and development  expenses  related to new
    product  development  and  increased  administration  costs to  support  the
    increased sales levels.

    Research and development expenses for continuing  operations increased $215,
    or 39%, to $773 during the first  quarter of fiscal 1999 compared to $558 in
    the first quarter of fiscal 1998.  As a percentage of sales from  continuing
    operations,  research and development  expenses increased from 4.4% to 5.2%.
    Research  and  development  expenses  were  increased to support new product
    development  for existing  customers,  for development of the automotive ETC
    product and for development of sensor-related products.

    Administration expenses for continuing operations increased $282, or 34%, in
    the first  quarter of fiscal  1999 to $1,105  compared  to $823 in the first
    quarter of fiscal 1998.  Administration  expenses as a percent of sales from
    continuing  operations increased to 7.4% in the first quarter of fiscal 1999
    compared to 6.5% in the first  quarter of fiscal  1998.  Increases in dollar
    amount in fiscal 1999 were attributed to additional  administrative expenses
    required to support increased sales volumes.


    Interest and Other Expenses
    ---------------------------

    Interest  expenses  increased  $78, or 29%, to $348 in the first  quarter of
    fiscal 1999 from $270 in the first quarter of fiscal 1998.  Prior year first
    quarter  interest  expense  was lower  because of  allocations  of  interest
    expense to discontinued  operations.  Allocated interest expense included in
    discontinued  operations  for the quarters  ended December 31, 1998 and 1997
    was  $87 and  $162,  respectively.  Equity  interest  in  loss of  affiliate
    decreased $168, or 47% to $190 in the first quarter of fiscal 1999 from $358
    in the first quarter of fiscal 1998 due to decreased  losses of Ajay Sports,
    Inc. Other  expenses  increased $118 in the first quarter of fiscal 1999 due
    primarily to costs associated with the repurchase of the Company's  building
    previously sold in a sale/leaseback transaction.

    Discontinued operations
    -----------------------

    The Company reported a net loss from discontinued  operations of $157 in the
    first quarter of fiscal 1998. The Company adopted a plan of disposal for the
    Agriculture Equipment segment in fiscal 1998, and accordingly, the estimated
    future  operating  losses of the segment were expensed in the fourth quarter
    of fiscal 1998.

    Net sales from the Agriculture  Equipment  segment  declined $470, or 21% to
    $1,776 in the first  quarter of fiscal 1999  compared to $2,246 in the first
    quarter  of fiscal  1998.  The  decline in sales was due to lower unit sales
    attributable  primarily to a poor farm economy. The loss from operations for
    the Agriculture  Equipment segment increased $451 to $629 due to lower gross
    margins of $119 and higher operating  expenses of $332. The net loss for the
    Agriculture  Equipment segment, net of income tax benefit of $286, increased
    $301 to $458.

    Net losses from the discontinued  Automotive  Accessories  segment were $391
    net of tax benefits of $201 for the first quarter  ended  December 31, 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 in the first quarter of fiscal 1998
    were  $1,582.  At December  31, 1997 the  Company  had  estimated  losses on
    disposal of $109 remaining as a current liability.

  
                                       10
<PAGE>
                                     Part II

Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities and Use of Proceeds

         None

Item 3.  Defaults Upon Senior Securities

         None

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

         (a)   Exhibits
               27 - Financial Data Schedule
         (b)   Reports on Form 8-K
               None


                                       11
<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/ Gerard A. Herlihy
                                                -------------------------------
                                                Gerard A. Herlihy, 
                                                Chief Financial Officer
                                                and Principal Accounting Officer











Date: February 16, 1999








                                       12
<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.





                                                By:
                                                -------------------------------
                                                Gerard A. Herlihy, 
                                                Chief Financial Officer
                                                and Principal Accounting Officer







Date: February 16, 1999












                                       12