FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                  For the quarterly period ended June 30, 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 1-5530

                           ALLIED PRODUCTS CORPORATION
                           ---------------------------
             (Exact name of registrant as specified in its charter)





            DELAWARE                                      38-0292230
            --------                                      ----------
 (State or other jurisdiction of              (I.R.S. Employer Identification
 incorporation or organization)                 Number)


 10 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS                         60606
--------------------------------------------------------------------------
(Address of principal executive offices)                          (Zip Code)


        Registrant's telephone number, including area code (312) 454-1020


                                 Not Applicable
                                 --------------
                 (former name, former address and former fiscal
                       year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of 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  requirement for
the past 90 days. Yes x No

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:  11,927,105 common shares, $.01
par value, as of July 31, 1998.





<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES


                                      INDEX


         PART I.   FINANCIAL INFORMATION
                   ---------------------

                   ITEM 1. FINANCIAL STATEMENTS

                           INTRODUCTION

                           CONDENSED CONSOLIDATED BALANCE SHEETS-
                            June  30, 1998 and December 31, 1997

                           CONDENSED CONSOLIDATED  STATEMENTS OF INCOME- 
                            Three and Six Months Ended June 30, 1998 and 1997

                           CONDENSED  CONSOLIDATED  STATEMENTS OF CASH FLOWS-
                            Six Months Ended June 30, 1998 and 1997

                           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                   ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                            CONDITION AND RESULTS OF OPERATIONS


         PART II.  OTHER INFORMATION
                   -----------------

                   ITEM 1.  NOT APPLICABLE

                   ITEM 2.  NOT APPLICABLE

                   ITEM 3.  NOT APPLICABLE

                   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                   ITEM 5.  OTHER INFORMATION

                   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         SIGNATURES
         ----------

         EXHIBIT  INDEX
         --------------


<PAGE>




                         PART I - FINANCIAL INFORMATION
                         ------------------------------

ITEM 1.  FINANCIAL STATEMENTS

            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES

                                  INTRODUCTION

         The condensed  consolidated financial statements included herein (as of
June 30,  1998 and for the three and six months  ended  June 30,  1998 and 1997)
have been  prepared by the  Company,  without  audit,  pursuant to the rules and
regulations  of  the   Securities  and  Exchange   Commission  and  reflect  all
adjustments which are, in the opinion of management, necessary to present fairly
the condensed  consolidated  financial  information  required therein.  All such
adjustments are of a normal,  recurring  nature.  The information as of December
31,  1997 is derived  from the  audited  year end  balance  sheet for that year.
Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted pursuant to such rules and regulations,  although
the Company  believes that the  disclosures are adequate to make the information
presented not  misleading.  It is suggested that these  financial  statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's latest annual report on Form 10-K.

         The results of  operations  for the three and six month  periods  ended
June 30,  1998 and 1997 are not  necessarily  indicative  of the  results  to be
expected for the full year.


<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>

                                                           June 30, 1998          December 31,1997
                                                           -------------          ----------------
<S>                                                        <C>                    <C>

Current Assets:
  Cash and cash equivalents                                $     489,000          $        609,000 
                                                           -------------          ----------------
  Notes and accounts receivable, less allowances of
     $652,000 and $531,000, respectively                   $  67,724,000          $     54,729,000
                                                           -------------          ----------------
  Inventories:
    Raw materials                                          $   8,986,000          $      6,193,000
    Work in process                                          103,630,000                58,090,000
    Finished goods                                            17,416,000                14,419,000
                                                           -------------          ----------------
                                                           $ 130,032,000          $     78,702,000
                                                           -------------          ----------------
 Deferred tax asset                                        $  12,773,000          $     12,773,000
                                                           -------------          ----------------
 Prepaid expenses                                          $     533,000          $        415,000
                                                           -------------          ----------------
       Total current assets                                $ 211,551,000          $    147,228,000
                                                           -------------          ----------------

 Plant and Equipment, at cost:
    Land                                                   $   2,170,000          $      2,243,000
    Building and improvements                                 51,557,000                40,750,000
    Machinery and equipment                                   58,121,000                51,339,000
                                                           -------------          ----------------
                                                           $ 111,848,000          $     94,332,000
   Less-Accumulated depreciation and amortization             46,285,000                48,811,000
                                                           -------------          ----------------
                                                           $  65,563,000          $     45,521,000
                                                           -------------          ----------------
 Other Assets:
    Deferred tax asset                                     $   4,071,000          $      4,071,000
    Deferred charges (goodwill), net of amortization           6,618,000                 1,491,000
    Other                                                      3,353,000                 1,472,000
                                                           -------------          ----------------
                                                           $  14,042,000          $      7,034,000
                                                           -------------          ----------------
                                                           $ 291,156,000          $    199,783,000
                                                           =============          ================
</TABLE>



The accompanying notes to consolidated financial statements are an integral 
       part of these statements.

<PAGE>




            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                    LIABILITIES AND SHAREHOLDERS' INVESTMENT

<TABLE>
<CAPTION>

                                                                     June 30, 1998          December 31, 1997                       
                                                                     -------------          -----------------
<S>                                                                  <C>                    <C>

Current Liabilities:
  Revolving credit agreement                                         $ 109,200,000          $      50,400,000
  Current portion of long-term debt                                        388,000                    268,000
  Accounts payable                                                      35,114,000                 19,923,000
  Accrued expenses                                                      24,868,000                 25,145,000
                                                                     -------------          -----------------
         Total current liabilities                                   $ 169,570,000          $      95,736,000
                                                                     -------------          -----------------
Long-term debt, less current portion shown above                     $   1,235,000          $         670,000
                                                                     -------------          -----------------
Other long-term liabilities                                          $  15,636,000          $      10,353,000
                                                                     -------------          -----------------
Commitments and Contingencies
Shareholders' Investment:
    Preferred stock:
       Undesignated-authorized 1,500,000 shares at June 30,
         1998 and  December 31, 1997; none issued                    $      -               $          -
   Common Stock, par value $.01 per share; authorized
      25,000,000 shares; issued 14,047,249 shares at June 30,
       1998 and December 31, 1997                                          140,000                    140,000
   Additional paid-in capital                                           94,336,000                 94,709,000
   Retained earnings                                                    52,350,000                 40,428,000
                                                                     -------------          -----------------
                                                                     $ 146,826,000          $     135,277,000
   Less: Treasury stock, at cost:  2,120,144 and 2,144,263
     shares at June 30, 1998 and December 31, 1997,
     respectively                                                      (42,111,000)               (42,253,000)
                                                                     -------------          -----------------
         Total shareholder's equity                                  $ 104,715,000          $      93,024,000
                                                                     -------------          -----------------

                                                                     $ 291,156,000          $     199,783,000
                                                                     =============          =================

</TABLE>


 The accompanying notes to consolidated financial statements are an integral 
      part of these statements.


<PAGE>

            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES


                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>


                                              Three Months Ended June 30,              Six Months Ended June 30,
                                            -------------------------------     ------------------------------------
                                                 1998             1997                1998                  1997
                                            -------------     -------------     -------------          -------------
<S>                                         <C>               <C>               <C>                    <C>

Net sales                                   $  88,985,000     $  76,902,000     $ 151,816,000          $ 149,783,000

Cost of products sold                          69,908,000        57,323,000       113,882,000             112,549,000
                                            -------------     -------------     ------------------     ---------------
  Gross profit                              $  19,077,000     $  19,579,000     $  37,934,000          $   37,234,000
                                            -------------     -------------     ------------------     ------------------

Other costs and expenses:

  Selling and administrative expenses       $   8,859,000     $   8,775,000     $  17,530,000           $ 17,268,000

  Interest expense                              1,447,000           958,000         2,537,000              1,652,000

  Other (income) expense, net                  (1,736,000)          112,000        (1,864,000)               541,000
                                            -------------     -------------     --------------          ------------

                                            $   8,570,000     $   9,845,000     $  18,203,000           $ 19,461,000
                                            -------------     -------------     -------------           ------------

Income before taxes                         $  10,507,000     $   9,734,000     $  19,731,000           $ 17,773,000

Provision for income taxes                      3,497,000         3,528,000         6,856,000              6,396,000
                                            -------------     -------------     -------------           ------------

Net income and comprehensive net income     $   7,010,000     $   6,206,000     $  12,875,000           $ 11,377,000
                                            =============     =============     =============           ============

Earnings per common share:
  Basic                                     $        0.59     $        0.51     $        1.08           $       0.93
                                            =============     =============     =============           ============

  Diluted                                   $        0.58     $        0.50     $        1.06           $       0.91
                                            =============     =============     =============           ============

Weighted average shares outstanding:
  Basic                                        11,923,000        12,120,000        11,924,000             12,202,000
                                            =============     =============     =============           ============

  Diluted                                      12,099,000        12,366,000        12,105,000             12,440,000
                                            =============     =============     =============           ============

Dividends per common share                  $        0.04     $      0.0333     $        0.08           $     0.0667
                                            =============     =============     =============           ============

</TABLE>


The accompanying notes to condensed consolidated financial statements are an 
     integral part of these statements.


<PAGE>



            ALLIED PRODUCTS CORPORATION AND CONSOLIDATED SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Six Months Ended June 30,
                                                                                -------------------------------------
                                                                                      1998                  1997
                                                                                ---------------        --------------
<S>                                                                             <C>                    <C>

Cash Flows from Operating Activities:
   Net income                                                                   $   12,875,000         $  11,377,000
   Adjustments to reconcile net income to net cash
      used for operating activities:
      Gains on sales of operating and nonoperating assets                           (1,972,000)             (143,000)
      Depreciation and amortization                                                  2,743,000             2,525,000
      Amortization of deferred charges                                                 132,000                89,000
      Deferred income tax provision                                                  5,900,000             5,648,000
      Changes in noncash assets and liabilities, net of
        noncash transactions:
         (Increase) in accounts receivable                                         (10,448,000)          (22,151,000)
         (Increase) in inventories                                                 (48,394,000)           (4,517,000)
         (Increase) decrease in prepaid expenses                                      (100,000)               15,000
         Increase (decrease)  in accounts payable and accrued expenses              13,070,000               (27,000)
      Other,net                                                                     (1,455,000)              113,000
                                                                                ---------------        --------------
   Net cash used for operating activities                                       $  (27,649,000)        $  (7,071,000)
                                                                                ---------------        --------------

Cash Flows from Investing Activities
   Additions to plant and equipment                                             $  (22,060,000)        $  (7,233,000)
   Payment for businesses acquired                                                 (11,290,000)                -
   Proceeds from sales of plant and equipment                                        3,383,000               404,000
                                                                                ---------------        --------------
   Net cash used for investing activities                                       $  (29,967,000)        $  (6,829,000)
                                                                                ---------------        --------------

Cash Flows from Financing Activities:
   Borrowings under revolving credit agreement                                  $   92,400,000         $  63,700,000
   Payments under revolving credit agreement                                       (33,600,000)          (36,900,000)
   Payments of short and long-term debt                                               (135,000)              (96,000)
   Purchase of treasury stock                                                         (776,000)          (12,956,000)
   Dividends paid                                                                     (478,000)             (407,000)
   Stock option transactions                                                            85,000               894,000
                                                                                ---------------        --------------
Net cash provided from financing activities                                     $   57,496,000         $  14,235,000
                                                                                ---------------        --------------
Net increase (decrease) in cash and cash equivalents                            $     (120,000)        $     335,000
Cash and cash equivalents at beginning of year                                         609,000               833,000
                                                                                ---------------        --------------
Cash and cash equivalents at end of period                                      $      489,000         $   1,168,000
                                                                                ===============        ==============

</TABLE>



The accompanying notes to condensed consolidated financial statements are an 
     integral part of the statements















<PAGE>




            Allied Products Corporation and Consolidated Subsidiaries
              Notes to Condensed Consolidated Financial Statements


(1) Accrued Expense
    ---------------

    The Company's accrued expenses consist of the following:


                                              6/30/98           12/31/97
                                             ---------         -----------
    Salaries and wages                    $  8,070,000        $  5,560,000
    Warranty                                 4,831,000           4,938,000
    Self insurance accruals                  1,515,000           2,858,000
    Pensions, including retiree health       5,052,000           6,439,000
    Taxes, other than income taxes           1,349,000           1,158,000
    Environmental matters                    1,463,000           1,810,000
    Other                                    2,588,000           2,382,000
                                          ------------         -----------
                                          $ 24,868,000        $ 25,145,000
                                          ============        ============

(2)      Earnings Per Common Share
         -------------------------

                  During 1997, the Financial  Accounting  Standards Board (FASB)
         issued  Statement  of  Financial  Accounting  Standards  No.  128 (SFAS
         128)--Earnings  per  Share.  Earnings  per  common  share and  weighted
         average shares  outstanding for the three and six months ended June 30,
         1997 have been restated to reflect the effect of a three-for-two  stock
         split  in 1997  and the  effect  of  adopting  the  provisions  of this
         accounting standard. Basic earnings per common share for the periods in
         1998 is  based on the  average  number  of  common  shares  outstanding
         (11,923,000  and 11,924,000 for the three and six months ended June 30,
         1998,  respectively).  Diluted  earnings  per common share for the same
         periods is based on the average number of common shares outstanding, as
         noted  above,  increased by the dilutive  effect of  outstanding  stock
         options  (176,000  and 181,000 for the three and six months  ended June
         30,  1998,  respectively).  Basic  earnings  per  common  share for the
         periods  in 1997 is  based  on the  average  number  of  common  shares
         outstanding  (12,120,000  and  12,202,000  for the three and six months
         ended June 30, 1997,  respectively).  Diluted earnings per common share
         for the same  periods in 1997 is based on the average  number of common
         shares  outstanding,  as noted  previously,  increased  by the dilutive
         effect of  outstanding  options  (246,000 and 238,000 for the three and
         six months ended June 30, 1997, respectively).







<PAGE>



(3)      Acquisitions
         ------------

                  During  the  second  quarter  of 1998,  the  Company  acquired
         substantially  all of the assets and  assumed  certain  liabilities  of
         Great Bend  Manufacturing  Company  (Great Bend) located in Great Bend,
         Kansas.  Great Bend  manufactures and sells  tractor-mounted  front-end
         loaders which are used  principally in agricultural  applications.  The
         Company also acquired in the second quarter of 1998  substantially  all
         of the assets of Universal Turf Equipment Corporation  (Universal Turf)
         located in Opp,  Alabama.  Universal Turf  manufactures  and sells turf
         maintenance  implements  including reel mowers,  verti-cut mowers, reel
         grinders and spraying  equipment.  The impact of these  acquisitions on
         the consolidated operating results of the Company in the second quarter
         and first half of 1998 is not considered significant.

(4)      Dispositions/Sales of Assets
         ----------------------------

                  "Other  (income)  expense,  net" for the six months ended June
         30, 1998 includes gains of approximately  $1,972,000 ($1,957,000 in the
         second quarter)primarily related to the sale of the Coldwater, Ohio 
         facility noted below.

(5)      Contingent Liabilities
         ----------------------

                  The Company is involved in a number of legal  proceedings as a
         defending party,  including product liability and environmental matters
         for which additional liability is reasonably possible.  However,  after
         consideration  of relevant  data  (consultation  with legal counsel and
         review of insurance coverage, accruals, etc.), management believes that
         the eventual  outcome of these matters will not have a material adverse
         effect on the Company's  financial  position or its ongoing  results of
         operations.

                  Reference  is  made  to  Note  10  of  Notes  to  Consolidated
         Financial  Statements in the Company's  1997 Annual Report on Form 10-K
         as it relates to a note receivable taken in connection with the sale of
         the business  and assets of the former  Littell  division.  Collections
         from this note in the six months ended June 30, 1998  totaled  $390,000
         ($195,000 in the second  quarter) and were included in "Other  (income)
         expense."

                  Reference  is  made  to  Note  10  of  Notes  to  Consolidated
         Financial  Statements in the Company's  1997 Annual Report on Form 10-K
         as it relates to the sale by the Company of a site in  Coldwater,  Ohio
         that  was  contingent  on the  issuance  by the  State  of  Ohio,  Ohio
         Environmental Protection Agency, of a covenant not to sue. On March 31,
         1998, the Ohio Environmental  Protection Agency issued the covenant not
         to sue.  The Company  closed on the sale of this  facility  for cash of
         $3,156,000 on May 13, 1998.


<PAGE>



                  At June 30,  1998,  the  Company was  contingently  liable for
         approximately  $1,048,000  primarily relating to outstanding letters of
         credit.

(6)      Income Taxes
         ------------

                  The  provision  for income taxes in the first half of 1998 and
         1997 is based upon the Federal  statutory rates adjusted for items that
         are not subject to taxes. See Note 4 of Notes to Consolidated Financial
         Statements  in the  Company's  1997  Annual  Report  on Form 10-K for a
         further discussion related to income taxes.

(7)      Summary of Other (Income) Expense
         ---------------------------------

                  Other  (income)  expense  for the three and six month  periods
         ended June 30, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
 
                                                 For the three months ended                For the six months ended
                                                 --------------------------             ------------------------------
                                                    6/30/98         6/30/97                6/30/98            6/30/97
                                                 -------------    ----------            -----------         ----------
        <S>                                      <C>              <C>                   <C>                  <C>

         Interest income                         $   (41,000)     $ (23,000)            $   (87,000)         $ (40,000)
         Goodwill amortization                        87,000         45,000                 132,000             89,000
         Net (gain) loss on sales
           of operating and non-
           operating assets                       (1,957,000)       (18,000)             (1,972,000)          (143,000)
         Litigation
           settlements/insurance
           provision                                 569,000        115,000                 569,000            557,000
         Payments received
           long-term notes
           receivable reserved for
           as uncollectible                         (195,000)      (500,000)               (390,000)          (500,000)
         Other miscellaneous                        (199,000)       493,000                (116,000)           578,000
                                                 ------------     ----------            ------------         ----------
                                                 $(1,736,000)     $ 112,000             $(1,864,000)         $ 541,000
                                                 ============     ==========            ============         ==========
</TABLE>

(8)      Financial Arrangements
         ----------------------

                  On June 30, 1998 the Company  entered into an amendment to the
         Amended and Restated Credit Agreement. The amendment provides for up to
         $145,000,000 (from $125,000,000) of borrowings and/or letters of credit
         at either a floating  prime or fixed LIBOR (with the rate  dependent in
         the ratio of Funded Debt to Operating Cash Flow) rate. The funds may be
         used for future  working  capital  needs of the  Company,  fixed  asset
         additions and possible acquisitions.



<PAGE>




ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

OPERATING RESULTS
-----------------

         During the second quarter of 1998, the Company  acquired  substantially
all of the assets and assumed  certain  liabilities of Great Bend  Manufacturing
Company (Great Bend) located in Great Bend, Kansas.  Great Bend manufactures and
sells   tractor-mounted   front-end   loaders  which  are  used  principally  in
agricultural  applications.  The Company also acquired in the second  quarter of
1998  substantially  all of the assets of Universal Turf  Equipment  Corporation
(Universal Turf) located in Opp, Alabama.  Universal Turf manufactures and sells
turf  maintenance  implements  including  reel mowers,  verti-cut  mowers,  reel
grinders  and  spraying  equipment.  The  impact  of these  acquisitions  on the
consolidated  operating  results of the Company in the second  quarter and first
half of 1998 is not considered significant.
         During  the  fourth   quarter  of  1997,  the  Company  sold  for  cash
substantially all of the assets of its Coz division.  The purchaser also assumed
certain specified liabilities associated with this division.

First Half of 1998 Compared to First Half of 1997
-------------------------------------------------

         Net sales in the first half of 1998 were  $151,816,000  compared to net
sales of $149,783,000 reported in the first half of 1997. Increased sales at the
Bush Hog  division  more than  offset the loss of revenues  associated  with the
Company's  former Coz  division,  which was sold in the fourth  quarter of 1997.
Income  before  taxes in the  first  half of the  current  year was  $19,731,000
compared to income before taxes of $17,773,000 reported in the first half of the
prior year. Income before taxes in the first half of 1998 included gains of 
approximately $1,972,000 primarily related to the sale of the Coldwater, Ohio
facility - see Note 4 of Notes to Condensed Consolidated Financial Statements.
Net income was  $12,875,000  ($1.08 per common  share-basic)  in the
first  half of 1998  compared  to net  income of  $11,377,000  ($.93 per  common
share-basic)  in the  first  half of  1997.  "Earnings  per  common  share"  and
"Weighted  average shares  outstanding" have been restated for the three and six
months ended June 30, 1997 to reflect the effect of a three-for-two  stock split
in 1997 and the effect of adopting Statement of Financial  Accounting  Standards
(SFAS) No. 128-Earnings per Share.

         At the Bush Hog and Great Bend  divisions,  net sales  increased 18% in
the first half of 1998  compared to the first half of 1997.  The majority of the
increase was associated  with the cutter products line at the Bush Hog division.
Cutter sales have benefitted from the end of the cattle herd  liquidation  cycle
in the spring of 1997.  Cattle  ranchers  use the cutters  for  grazing  pasture
maintenance. Cutter sales in 1998 were also favorably affected by new/redesigned
products for the turf and landscaping  market for utilization by commercial turf
(sod) growers and for golf course maintenance.  Loader sales have also increased
in the current year, with the majority of the increase


<PAGE>



in this product line related to the  acquisition of the Great Bend division,  as
noted above. Sales of the Great Bend division represent approximately 25% of the
overall  increase  in  agricultural  product  sales  in the  first  half of 1998
compared  to the first half of 1997.  Gross  profits  and gross  profit  margins
increased  in the  first  half  of the  current  year due to the effects of 
favorable  manufacturing variances which resulted from increased facility  
utilization  (production)  including longer  production  lot sizes and increased
labor  efficiencies.  The impact of increased sales volume also resulted in 
increased gross profits in 1998.

         Severe weather conditions in the southwestern  United States as well as
some local flooding in the central part of the country are anticipated to result
in lower than  expected  sales for the  Company's  agricultural  products in the
third quarter.  Some cattle herd liquidation has taken place in the southwest as
a result of drought  conditions.  Commodity  prices have also  decreased  in the
first half of 1998.  As a result,  the Bush Hog  division  expects to scale back
production  schedules  in  the  third  quarter  of  1998  to  adjust  to  market
conditions.

         Net sales at the Verson  division  increased by 8% in the first half of
1998 compared to the first half of 1997. Revenue and profits are recognized on a
percentage  of  completion  basis for press  production  at this  division.  The
increase in net sales was primarily  related to increased  press orders received
during the second quarter of 1998 including the  recently announced major orders
for presses of approximately $80,000,000. Gross profits and gross profit margins
decreased at the Verson  division in the first half of 1998 compared to the same
six month period of 1997. Margins have been negatively impacted by manufacturing
constraints  associated with insufficient  manufacturing causing the division to
outsource an increased level of production,  resulting in increased  costs.  The
mix of production has also resulted in  inefficiencies.  Production in the first
half of 1998  included  newly  designed  presses for each of the major U.S. auto
manufacturers.  Some of the engineering  requirements related to these and other
orders have also been subcontracted out. These  manufacturing  problems have led
to the delayed shipment of certain  presses.  Warranty costs have also increased
in 1998 due to the  increased  sales  volume and mix of  products  manufactured.
These increased costs were partially offset by the settlement of a claim against
a third party, which negatively impacted periods prior to 1997.

         Selling and administrative expenses increased in the first half of 1998
to $17,530,000  from  $17,268,000 in the first half of 1997. As a percent of net
sales, these costs remained  constant.  Selling expense increases were primarily
related to  increased  commissions  at the Bush Hog  division  (associated  with
increased sales),  costs related to the establishment of an international  sales
and marketing  department at the Verson division  (primarily salaries and travel
costs) and the  acquisition  of the Great Bend  division as noted  above.  These
increases were partially  offset by decreased costs  associated with the sale of
the  Coz  division  in  the  fourth  quarter  of  1997.  
Administrative  costs have  decreased in the first half of 1998.  Cost increases
related to staff  expansion and legal fees  associated  with the settlement of a
claim at the Verson division and the acquisition of


<PAGE>



the Great Bend  division were offset by the impact of certain  Corporate  Office
retirements in late 1997 and the sale of the Coz division.

         Interest  expense in the first half of 1998 was $2,537,000  compared to
interest  expense of  $1,652,000  reported  in the first half of the prior year.
Increased borrowing needs were related to higher consolidated  receivable levels
(primarily  associated  with Bush Hog's  increased  sales  volume) and increased
inventory levels  (primarily  associated with the Verson division where shipment
delays have occurred). Other borrowing needs included fixed asset additions over
the past twelve  months,  including  the Verson plant  expansion,  the impact of
decreased  customer  deposits and progress  payments against press orders at the
Verson  division,  and the  acquisitions of Great Bend and Universal Turf in the
second quarter of 1998. Interest expense in the first half of 1998 was partially
offset by the  interest  cost  capitalized  relating to the  Company's  building
expansion project at the Verson division.

         Reference  is  made  to  Note  7 of  Notes  to  Condensed  Consolidated
Financial Statements for an analysis of Other (income) expense in the first half
of 1998 and 1997.

Second Quarter of 1998 Compared to Second Quarter of 1997
---------------------------------------------------------

         Net sales in the second  quarter of 1998 were  $88,985,000  compared to
net sales of $76,902,000  reported in the second quarter of 1997.  Income before
taxes in the second  quarter of the  current  year was  $10,507,000  compared to
income  before taxes of $9,734,000  reported in the second  quarter of the prior
year. Income before taxes in the second quarter of 1998 included gains of
approximately $1,957,000 primarily related to the sale of the Coldwater, Ohio
facility - see Note 4 of Notes to Condensed Consolidated Financial Statements.
Net income was  $7,010,000  ($.59 per common  share-basic)  in the second
quarter  of  1998  compared  to  net  income  of  $6,206,000  ($.51  per  common
share-basic) in the second quarter of 1997. Reference is made to the restatement
of "Earnings per common share" and "Weighted  average share  outstanding"  noted
above.

         At the Bush Hog and Great Bend  divisions,  net sales  increased 27% in
the second quarter of 1998 compared to the same quarter of the prior year,  with
approximately  one-third of this increase  related to the  acquisition  of Great
Bend.  The majority of the  increase  was related to Bush Hog's  cutter  product
lines.  Loader sales also increased  during the period at the Bush Hog division.
Sales during the period benefitted from the effects of favorable spring planting
conditions.  Gross  profits  improved  at the Bush Hog  division  in the  second
quarter of 1998  primarily  due to increased  sales  volume  noted above.  Gross
profit  margins also improved  compared to the second quarter of the prior year.
Favorable  manufacturing  variances resulted from increased production lot sizes
and increased labor efficiencies.

         At the Verson division, sales increased 28% in the second quarter of 
1998 compared to thesecond quarter of the prior year.  The entire increase was 
related to increased press production.  As


<PAGE>



noted above, major press orders were received during the second quarter of 1998.
Production  has begun on these orders in order to meet delivery date  deadlines.
Gross profits and gross profit margins have decreased at the Verson  division in
the second  quarter of the current  year  compared to the same  quarter of 1997.
Margins have been pressured by the impact of increased outsourcing of production
and engineering  services,  increased  warranty  provisions and lack of adequate
manufacturing capacity. The division is in the process of expanding its assembly
area and  construction  will be completed in the last quarter of this year. Some
press  shipments  have  been  delayed  due  to  production  problems.  While  no
significant  penalties have been incurred with these late shipments,  the excess
number of  presses in the  assembly  and other  manufacturing  areas have led to
manufacturing inefficiencies.

         Selling and  administrative  expenses  have  increased  slightly in the
second  quarter of 1998 to  $8,859,000  from  $8,775,000  reported in the second
quarter of 1997. As a percent of net sales,  these costs have decreased to 10.0%
in the second  quarter of this year compared to 11.4% of net sales in the second
quarter  of the  prior  year.  Increases  in  selling  expenses  at the Bush Hog
division were  primarily  related to commissions  associated  with the increased
sales volume. At the Verson division, increases were related to costs associated
with the establishment of an international sales and marketing department. Great
Bend (acquired in the second quarter of 1998) selling expenses also added to the
consolidated increase in these costs.  Administrative  expenses decreased in the
second quarter of 1998. The impact of Corporate  Office  retirements in the last
half of 1997 was the main cause of this decrease.

         Interest expense in the second quarter of 1998 was $1,447,000  compared
to  interest  expense  of  $958,000  reported  in the  second  quarter  of 1997.
Increased  borrowing  needs were related to increased  receivable  levels of the
Bush Hog division,  increased  inventory  levels at the Verson  division,  fixed
asset additions at both the Bush Hog and Verson  divisions and the  acquisitions
of Great Bend and Universal Turf.  Interest  expense was partially offset by the
interest cost capitalized  relating to the Company's  building expansion project
at the Verson division.

         Reference  is  made  to  Note  7 of  Notes  to  Condensed  Consolidated
Financial  Statements  for an analysis of Other  (income)  expense in the second
quarter of 1998 and 1997.

FINANCIAL CONDITION AND LIQUIDITY
---------------------------------

         Working capital at June 30, 1998 was $41,981,000 (current ratio of 1.25
to 1.0) compared to working  capital of  $51,492,000  (current  ratio of 1.54 to
1.0) at December 31, 1997. Net  receivables  increased by $12,995,000  since the
end of 1997.  The  majority of the  increase  was  associated  with the Bush Hog
division  where cash  collections  are  dependent  upon the  retail  sale of the
product by the dealer. Sales, which are typically strong in the first quarter of
the year or just prior to the use season by the farmer,  continued  to be strong
in the second quarter of 1998. Extended


<PAGE>



payment terms are offered to dealers in the form of floor plan  financing  which
is customary in the industry. Receivables also increased with the acquisition of
the  Great  Bend  division.  On a  consolidated  basis,  inventory  levels  have
increased  $51,330,000  since the end of 1997.  The majority of the increase was
related  to the  Verson  division  and was the  direct  result of the number and
extent  of jobs in  process,  the  impact of  decreased  customer  deposits  and
progress  payments  against  press  orders  and the  effects  of  delivery  date
extensions.  Inventory levels have also increased at the Bush Hog division where
record first half sales have  occurred in 1998.  The  acquisition  of Great Bend
also resulted in increased consolidated inventories.

         Fixed   asset   additions   in  the  first  half  of  1998   (excluding
acquisitions)  totaled  $22,060,000.   The  majority  of  these  additions  were
represented  by  construction  costs  associated  with a  $28,000,000  expansion
project at the Verson  division.  This project will more than double the size of
Verson's assembly facility and increase the division's capacity by approximately
35%. This,  combined with the division's focused factory concept and the overall
strengthening of its infrastructure,  should help alleviate capacity constraints
at this operation.  Expenditures  for production  machinery and equipment at all
manufacturing  divisions  were  also  made  in the  first  half of  1998.  It is
anticipated  that the equipment will result in reduced  manufacturing  costs and
improvements in product quality.

         Net  borrowings  under  the  Company's   Amended  and  Restated  Credit
Agreement  increased by $58,800,000 since the end of 1997. These borrowings were
used to finance working capital needs and fixed asset additions noted above.

         As of June 30,  1998,  the  Company had cash  balances of $489,000  and
additional funds of $33,963,000  available under its Amended and Restated Credit
Agreement.  Significant  capital  will be  required to  complete  the  expansion
project at the Verson  division as noted above. At the end of the second quarter
of 1998,  the Company  entered  into an  amendment  to the Amended and  Restated
Credit  Agreement.   The  amendment   provides  for  up  to  $145,000,000  (from
$125,000,000) of borrowings  and/or letters of credit at either a floating prime
or fixed LIBOR (with the rate dependent on the ratio of Funded Debt to Operating
Cash Flow) rate. These funds may be used for future working capital needs of the
Company,  fixed asset additions and acquisitions.  The Company believes the cash
flow from  operations and funds  available under the Amended and Restated Credit
Agreement are adequate to finance its operations and capital expenditures in the
near future.  During the first half of 1998,  the Company has been in compliance
with all provisions of loan agreements in effect.

IMPACT FROM NOT YET EFFECTIVE RULES
-----------------------------------

         In June 1997, the Financial  Accounting  Standards  Board (FASB) issued
SFAS  No.  131   Disclosures   about  Segments  of  an  Enterprise  and  Related
Information.  This  statement  establishes  standards  for the way  that  public
business enterprises report information about operating segments


<PAGE>



in interim financial reports issued to shareholders subsequent to initial annual
financial  statements  disclosure.  It also  establishes  standards  for related
disclosures  about products and services,  geographic areas and major customers.
This  statement is effective on an annual  basis for  financial  statements  for
periods beginning after December 15, 1997. Interim reporting  requirements begin
in 1999. Comparative information for earlier years is also to be presented.

         In February 1998, the FASB issued SFAS No. 132 -Employers'  Disclosures
about  Pensions  and  Other  Postretirement  Benefits.  This  statement  revises
employers'  disclosures about pension and other postretirement benefit plans. It
does not change the  measurement or recognition of these plans.  It standardizes
the disclosure requirements for pension and other postretirement benefits to the
extent practicable,  requires  additional  information on changes in the benefit
obligations  and fair  values  of plan  assets  that will  facilitate  financial
analysis,  and eliminates  certain  disclosures  that are no longer as useful as
they were when other related SFAS were issued.  The Company is in the process of
evaluating the impact of these statements on its financial reporting.

         In June 1998,  the FASB issued SFAS No. 133 - Accounting for Derivative
Instruments and Hedging Activities.  This statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives)  and for  hedging  activities.  The  Company  at this time does not
participate  in any  transactions  covered under the provisions of SFAS No. 133,
which would be effective July 1, 1999.

SAFE HARBOR STATEMENT
---------------------

         Statements  contained within the Management  Discussion and Analysis of
Financial  Condition and Results of Operations  that relate to future  operating
periods are subject to risks and  uncertainties  that could cause actual results
to differ from management's  projections.  Operations of the Company include the
manufacturing and sale of agricultural and industrial machinery.  In relation to
the  Bush Hog and  Great  Bend  divisions,  forward-looking  statements  involve
certain   factors  that  are  subject  to  change.   These  elements   encompass
interrelated  factors  that  affect  farmers  and cattle  ranchers'  confidence,
including  demand for  agricultural  products,  grain  stock  levels,  commodity
prices,  weather  conditions,  crop and animal diseases,  crop yields, farm land
values and government farm programs.  Other factors  affecting all operations of
the Company  include  actions of  competitors  in the  industries  served by the
Company,  production  difficulties  including  capacity and supply  constraints,
labor relations, interest rates and other risks and uncertainties. The Company's
outlook is based upon assumptions relating to the factors discussed above.





<PAGE>




                           PART II - OTHER INFORMATION


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

            On  May  20,  1998  the  Registrant   held  its  annual  meeting  of
shareholders.  Copies of the related proxy statement have been previously  filed
with the Securities and Exchange Commission.
The following item was voted on by the Company's shareholders:

         Election of Three  Directors.  Proxies for the meeting  were  solicited
         -----------------------------
pursuant to  Regulation  14A.  There was no  solicitation  in  opposition to the
management's  nominees as listed in the proxy statement.  The nominees  received
the following number of votes:

         Class B Directors - Terms expire in 2001 - Mr. L.A. Drexler, 
         -------------------------------------------------------------
         Mr. John E. Jones and Mr. Stanley J. Goldring
         ---------------------------------------------
             For Mr. Drexler - 10,498,910; withheld from Mr. Drexler - 20,848.
             For Mr. Jones - 10,507,749; withheld from Mr. Jones - 12,009.
             For Mr. Goldring - 10,508,912; withheld from Mr. Goldring - 10,846

         The terms of the following directors continued after the meeting:

         Class C Directors - Terms expire in 1999
         ----------------------------------------
                  Mr. William D. Fischer and Mr. S.S. Sherman

         Class A  Directors - Terms expire in 2000
         -----------------------------------------
                  Mr. Richard A. Drexler, Mr. John Puth and Mr. Michell I.Quain
       .
         Approximately  1,397,  000 shares held by brokers and nominees were not
voted in the election of directors.

         1999 Annual Meeting   After February 23, 1999, notice to the Company of
         -------------------
a shareholder proposal submitted for consideration at the 1999 Annual Meeting of
Shareholders which is not submitted for inclusion in the Company's proxy
statement and form of proxy, will be considered untimely and the persons named
in the proxies solicited by the Company may exercise discretionary voting power
with respect to any such proposal.
         

Item 5            Other Information
                  -----------------

                  Reference is made to Note 8 Financial  Arrangements of " Notes
to Condense  Consolidated  Financial  Statements" and Exhibit 10 for information
related to the Amendment to the Amended and Restated Credit Agreement.





<PAGE>



Item 6.           Exhibit and Reports on Form 8-K
                  -------------------------------

(a)      Exhibits - See Exhibit Index included herein.

(b)      Reports on Form 8-K - there were no reports on Form 8-K for the three
         months ended June 30, 1998.



































<PAGE>




SIGNATURES
----------

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.




                                                ALLIED PRODUCTS CORPORATION
                                                ---------------------------
                                                       (REGISTRANT)




August 13,1998                      /s/ Robert J. Fleck
--------------                      -------------------
                                    Robert J. Fleck
                                    Vice President- Accounting and Chief 
                                         Accounting & Administrative Officer




August 13, 1998                     /s/ Mark C. Standefer
---------------                     ---------------------
                                    Mark C. Standefer
                                    Vice President, General Counsel & Secretary



























<PAGE>





                           ALLIED PRODUCTS CORPORATION

                                INDEX TO EXHIBITS




EXHIBIT NO.                       DESCRIPTION OF EXHIBITS

    10              Material Contract - Amendment No. 3 to the Credit Agreement
    27              Financial Data Schedules