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                                                                    EXHIBIT 10.3


                             SIFCO INDUSTRIES, INC.
                          1998 LONG-TERM INCENTIVE PLAN


1. PURPOSES

      The purposes of the SIFCO Industries, Inc. 1998 Long-Term Incentive Plan
      (the "Plan") are to promote the long-term growth and performance of SIFCO
      Industries, Inc. and its subsidiaries by providing an opportunity for
      employees of SIFCO Industries, Inc. and its subsidiaries (collectively,
      the "Company") to participate through share ownership in the long-term
      growth and success of the Company, enhancing the Company's ability to
      attract and retain persons with desired abilities, providing additional
      incentives for such persons and furthering the identity of interests of
      employees and shareholders of the Company.

2. DEFINITIONS

      (a)   "Award" means any form of stock option, stock appreciation right,
            restricted shares, share or share-based award or performance share
            granted to a Participant under the Plan.

      (b)   "Award Agreement" means a written agreement between the Company and
            a Participant setting forth the terms, conditions and limitations
            applicable to an Award.

      (c)   "Board" means the Board of Directors of SIFCO Industries, Inc.

      (d)   "Code" means the Internal Revenue Code of 1986, as amended from time
            to time.

      (e)   "Committee" means the Compensation and Stock Option Committee of the
            Board, or such other committee of the Board that is designated by
            the Board to administer the Plan, provided that the Committee shall
            be constituted so as to satisfy any applicable legal requirements,
            including the requirements of Rule 16b-3 promulgated under the
            Securities Exchange Act of 1934, as amended (the "Exchange Act"),
            and Section 162(m) of the Code or any respective successor rule.

      (f)   "Fair Market Value" means the closing price of Shares as reported on
            the American Stock Exchange for the date in question, provided that
            if no sales of Shares were made on the American Stock Exchange on
            that date, the closing price of Shares as reported on the American
            Stock Exchange for the preceding day on which sales of Shares were
            made on the American Stock Exchange shall be used.

      (g)   "Participant" means any employee of the Company or its direct or
            indirect subsidiaries or any other person whose selection the
            Committee determines to be in the best interests of the Company, to
            whom an Award is made under the Plan.

      (h)   "Shares" means the common stock, par value $1.00 per share, of the
            Company.

3. SHARES AVAILABLE FOR AWARDS

      Subject to adjustment as provided in Section 11 below, the aggregate
      number of Shares which may be awarded under the Plan in each fiscal year
      of the Company shall be one and one half percent (1.5%) of the total
      outstanding Shares as of September 30, 1998 up to a maximum of five
      percent (5%) of such total outstanding Shares. Shares issuable under the
      Plan may consist of authorized and unissued Shares or treasury Shares.

      Any Shares issued by the Company through the assumption or substitution of
      outstanding grants previously made by an acquired corporation or entity
      shall not reduce the Shares available for Awards under the Plan. If any
      Shares subject to any Award granted under the Plan are forfeited or if
      such Award otherwise terminates without the issuance of such Shares or
      payment of other consideration in lieu of such Shares, the Shares subject
      to such Award, to the extent of any such forfeiture or termination, shall
      again be available for grant under the Plan as if such Shares had not been
      subject to an Award.


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4. ADMINISTRATION

      The Plan shall be administered by the Committee, which shall have full
      power and authority to interpret the Plan, to grant waivers of Plan
      restrictions and to adopt such rules, regulations and policies for
      carrying out the Plan as it may deem necessary or proper in order to
      further the purposes of the Plan. In particular, the committee shall have
      the authority to (i) select Participants to receive Awards, (ii) determine
      the number and type of Awards to be granted, (iii) determine the terms and
      conditions, not inconsistent with the terms hereof, of any Award grants,
      (iv) interpret the terms and provisions of the Plan and any Award grants,
      (v) prescribe the form of any agreement or instrument executed in
      connection with any Award, and (vi) establish, amend and rescind such
      rules, regulations and policies for the administration of the Plan as it
      may deem advisable from time to time.

5. AWARDS

      The Committee shall determine the type(s) of Award(s) to be made to each
      Participant and shall set forth in the related Award Agreement the terms,
      conditions and limitations applicable to each Award. Awards may include
      but are not limited to those listed in this Section 5. Awards may be made
      singly, in combination, in tandem or in exchange for a previously granted
      Award, and also may be made in combination or in tandem with, in
      replacement of, or as alternatives to, grants or rights under any other
      employee plan of the Company, including the plan of any acquired entity.

      (a)   Stock Options. Awards may be made in the form of stock options,
            which may be incentive stock options within the meaning of Section
            422 of the Code or non-statutory stock options not intended to
            qualify under Section 422 of the Code. Incentive stock options may
            be granted only to employees. The aggregate Fair Market Value
            (determined at the time the option is granted) of Shares as to which
            incentive stock options are exercisable for the first time by a
            Participant during any calendar year (under the Plan and any other
            plan of the Company) shall not exceed $100,000 (or such other limit
            as may be required by the Code from time to time). The exercise
            price of stock options granted under the Plan shall be not less than
            100% of Fair Market Value on the date of the grant. A stock option
            granted under the Plan shall be exercisable in whole or in such
            installments and at such times and upon such terms as may be
            determined by the Committee, provided that no stock option shall be
            exercisable more than ten years after the date of grant. A
            participant may pay the exercise price of a stock option in cash,
            Shares or a combination of cash and Shares. The Committee shall
            establish appropriate procedures for accepting Shares in payment of
            the exercise price of a stock option and may impose such conditions
            as it deems appropriate on such use of Shares.

      (b)   Stock Appreciation Rights. Awards may be granted in the form of
            stock appreciation rights ("SARs"). SARs shall entitle the recipient
            to receive a payment, in cash or Shares, equal to the appreciation
            in market value of a stated number of Shares from the price stated
            in the Award Agreement to the Fair Market Value on the date of
            exercise or surrender. SARs may be granted either separately or in
            conjunction with other Awards granted under the Plan. Any SAR
            related to a non-statutory stock option may be granted at the same
            time such option is granted or any time thereafter before exercise
            or expiration of such option. Any SAR related to an incentive stock
            option must be granted at the same time such option is granted. Any
            SAR related to an option shall be exercisable only to the extent the
            related option is exercisable. In the case of any SAR related to any
            option, the SAR or applicable portion thereof shall terminate and no
            longer be exercisable upon the termination or exercise of the
            related option. Similarly, upon exercise of an SAR as to some or all
            of the Shares covered by a related option, the related option shall
            be canceled automatically to the extent of the SARs exercised, and
            such Shares shall not thereafter be eligible for grant. The
            Committee may impose such conditions or restrictions upon the
            exercise of any SAR as it shall deem appropriate.

      (c)   Restricted Shares. Awards may be granted in the form of restricted
            Shares in such numbers and at such times as the Committee shall
            determine. Awards to restricted Shares shall be subject to such
            terms, conditions or restrictions as the Committee deems appropriate
            including, but not limited to restrictions on transferability,
            requirements of continued employment, individual performance or
            financial performance of the Company. The period of vesting and
            forfeiture restrictions shall be established by the Committee at the
            time of grant, except that no restriction period shall be less than
            12 months. During the period in which any restricted Shares are
            subject to forfeiture restrictions, the Committee may, in its
            discretion, grant to the Participant to whom such restricted Shares
            have been awarded, all or any of the rights of a shareholder with
            respect to such restricted Shares, including the right to vote such
            Shares and to receive dividends with respect to such Shares.

      (d)   Performance Shares. Awards may be made in the form of Shares that
            are earned only after the attainment of predetermined performance
            targets as established by the Committee at the time an Award is made
            ("Performance Shares"). A performance target shall be based upon one
            or any combination of the following: (i)


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            revenues of the Company; (ii) operating income of the Company; (iii)
            net income of the Company; (iv) earnings per Share; (v) the
            Company's return on equity; (i) cash flow of the Company; (vii)
            Company shareholder total return; (viii) return on assets; (ix)
            return on investment; (x) asset turnover; (xi) liquidity; (xii)
            capitalization; (xiii) stock price; (xiv) expenses; (xv) operating
            profit and margin;(xvi) retained earnings; (xvii) market share;
            (xviii) sales to targeted customers; (xix) customer satisfaction;
            (xx) quality measures; (xxi) productivity; (xxii) safety measures;
            or (xxiii) educational and technical skills of employees.
            Performance targets may also be based on the attainment of levels of
            performance of the Company and/or any of its affiliates or divisions
            under one or more of the measures described above relative to the
            performance of other businesses. The Committee shall be permitted to
            make adjustments when determining the attainment of a performance
            target to reflect extraordinary or nonrecurring items or events, or
            unusual nonrecurring gains or losses identified in the Company's
            financial statements, as long as any such adjustments are made in a
            manner consistent with Section 162(m) of the Code to the extent
            applicable. Awards of Performance Shares made to Participants
            subject to Section 162(m) of the Code are intended to qualify under
            Section 162(m) and provisions of such Awards shall be interpreted in
            a manner consistent with that intent to the extent appropriate. The
            foregoing provisions of this Section 5(d) also shall be applicable
            to Awards of restricted Shares made under Section 5(c) to the extent
            such Awards of restricted Shares are subject to the financial
            performance of the Company. At the end of the applicable performance
            period, Performance Shares shall be converted into Shares (or cash
            or a combination of Shares and cash, as set forth in the Award
            Agreement) and distributed to Participants based upon the applicable
            performance entitlement. Award payments made in cash rather than the
            issuance of Shares shall not, by reason of such payment in cash,
            result in additional Shares being available under the Plan.

      (e)   Stock Awards. Awards may be made in Shares or on a basis valued in
            whole or in part by reference to, or otherwise based upon, Shares.
            Share awards shall be subject to conditions established by the
            Committee and set forth in the Award Agreement.

6. PAYMENT OF AWARDS; DEFERRALS

      Payment of Awards may be made in the form of Shares, cash or a combination
      of Shares and cash and may include such restrictions as the Committee
      shall determine, including restrictions on transfer and forfeiture
      provisions. With Committee approval, payments may be deferred, either in
      the form of installments or a future lump sum payment. The Committee may
      permit Participants to elect to defer payments of some or all types of
      Awards in accordance with procedures established by the Committee to
      assure that such deferrals comply with applicable requirements of the Code
      including the capability to make further deferrals for payment after
      retirement. The Committee may also establish rules and procedures for the
      crediting of interest on deferred cash payments and dividend equivalents
      for deferred payments denominated in Shares.

7. TAX WITHHOLDING

      The Company shall have the authority to withhold, or to require a
      Participant to remit to the Company, prior to issuance or delivery of any
      Shares or cash relating to an Award made under the Plan, an amount
      sufficient to satisfy federal, state and local tax withholding
      requirements associated with any Award. In addition, the Company may, in
      its sole discretion, permit a Participant to satisfy any tax withholding
      requirements, in whole or in part, by (i) delivering to the Company Shares
      held by such Participant having a Fair Market Value equal to the amount of
      the tax or (ii) directing the Company to retain Shares having such Fair
      Market Value and otherwise issuable to the Participant under the plan.

8. TERMINATION OF EMPLOYMENT

      If the employment of a Participant terminates for any reason, all
      unexercised, deferred and unpaid Awards shall be exercisable or paid in
      accordance with the applicable Award Agreement, which may provide that the
      Committee may authorize, as it deems appropriate, the acceleration and/or
      continuation of all or any part of Awards granted prior to such
      termination.

9. NONASSIGNABILITY

      Except as may be otherwise provided in the relevant Award Agreement, no
      Award or any benefit under the Plan shall be assignable or transferable,
      or payable to or exercisable by, anyone other than the Participant to whom
      it was granted.

10.  CHANGE IN CONTROL

      (a)   In the event of a Change in Control (as defined below) of the
            Company, and except as the Board may expressly provide otherwise,
            (i) all stock options or SARs then outstanding shall become fully
            exercisable as of the date of the Change in Control, whether or not
            then otherwise exercisable, (ii) all restrictions and conditions of
            all


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            Awards of restricted Shares then outstanding shall be deemed
            satisfied as of the date of the Change in Control, and (iii) all
            Awards of Performance Shares shall be deemed to have been fully
            earned as of the date of the Change in Control.

      (b)   A "Change in Control" of the Company shall have occurred when any of
            the following events shall occur:

                  (i)   The Company is merged, consolidated or reorganized into
                        or with another corporation or other legal person, and
                        immediately after such merger, consolidation or
                        reorganization less than a majority of the combined
                        voting power of the then-outstanding securities of such
                        corporation or person immediately after such transaction
                        are held in the aggregate by the holders of Voting Stock
                        (as that term is hereafter defined) of the Company
                        immediately prior to such transaction;

                  (ii)  The Company sells all or substantially all of its assets
                        to any other corporation or other legal person, less
                        than a majority of the combined voting power of the
                        then-outstanding securities of such corporation or
                        person immediately after such sale are held in the
                        aggregate by the holders of Voting Stock of the Company
                        immediately prior to such sale;

                  (iii) There is a report filed or required to be filed on
                        Schedule 13D or Schedule 14D-1 (or any successor
                        schedule, form or report), each as promulgated pursuant
                        to the Exchange Act, disclosing that any person (as the
                        term "person" is used in Section 13(d)(3) or Section
                        14(d)(2) of the Exchange Act) has become the beneficial
                        owner (as the term "beneficial owner", is defined under
                        Rule 13d-3 or any successor rule or regulation
                        promulgated under the Exchange Act) of securities
                        representing 20% or more of the combined voting power of
                        the then-outstanding securities entitled to vote
                        generally in the election of directors of the Company
                        ("Voting Stock");

                  (iv)  The Company files a report or proxy statement with the
                        Securities and Exchange Commission pursuant to the
                        Exchange Act disclosing in response to Form 8-K or
                        Schedule 14A (or any successor schedule, form or report
                        or item herein) that a change in control of the Company
                        has or may have occurred or will or may occur in the
                        future pursuant to any then-existing contract or
                        transaction; or

                  (v)   If during any period of two consecutive years,
                        individuals who at the beginning of any such period
                        constitute the Directors of the Company cease for any
                        reason to constitute at least a majority thereof,
                        provided, however, that for purpose of this clause (v),
                        each Director who is first elected, or first nominated
                        for election by the Company's shareholders by a vote of
                        at least two-thirds of the Directors of the Company (or
                        a committee thereof) then still in office who were
                        Directors of the Company at the beginning of any such
                        period will be deemed to have been a Director of the
                        Company at the beginning of such period.

      Notwithstanding the foregoing provisions of Section 10 (b)(iii) or (iv)
      hereof, unless otherwise determined in a specific case by majority vote of
      the Board, a "Change in Control" shall not be deemed to have occurred for
      purposes of the Plan solely because (i) the Company, (ii) an entity in
      which the Company directly or indirectly beneficially owns 50% or more of
      the voting securities or interest, or (iii) any Company-sponsored employee
      stock ownership plan or any other employee benefit plan of the Company,
      either files or becomes obligated to file a report or a proxy statement
      under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule
      14A (or any successor schedule, form or report or item herein) under the
      Exchange Act, disclosing beneficial ownership by it of shares of Voting
      Stock, whether in excess of 20% or otherwise, or because the Company
      reports that a change in control of the Company has or may have occurred
      or will or may occur in the future by reason of such beneficial ownership.

11. ADJUSTMENTS UPON CHANGES OF CAPITALIZATION

      In the event of any change in the outstanding Shares by reason of a
      reorganization, recapitalization, stock split, stock dividend, combination
      or exchange of shares, merger, consolidation or any change in the
      corporate structure or Shares of the Company, the number of Shares as to
      which Awards may be granted under the Plan, including limitations relating
      to incentive stock option Awards and maximum Awards to individual
      Participants, the number of Shares issuable pursuant to then outstanding
      Awards, and/or, if appropriate, the prices of Shares related to
      outstanding Awards, shall be appropriately and proportionately adjusted.


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12. RIGHTS OF EMPLOYEES

      Nothing in the Plan shall interfere with or limit in any way the right of
      the Company or any subsidiary to terminate any Participant's employment at
      any time, nor confer upon any Participant any right to continued
      employment with the Company or any subsidiary.

13. AMENDMENTS, SUSPENSION OR TERMINATION OF PLAN AND AWARDS

      The Board may amend, suspend or terminate the Plan at any time, provided
      that no such action shall be taken that would impair the rights under an
      outstanding Award without the Participant's consent.

      The Board may amend the terms of any outstanding Award, prospectively or
      retroactively, but no such amendment shall impair the rights of any
      Participant without the Participant's consent and no such amendment shall
      have the effect, with respect to any employee subject to Section 162(m) of
      the Code, of increasing the amount of any Award from the amount that would
      otherwise be payable pursuant to the formula and/or goals previously
      established for such Participant.

14. GOVERNING LAW

      The Plan, together with all determinations and actions made or taken in
      connection therewith, to the extent not otherwise governed by the Code or
      other laws of the United States, shall be governed by the laws of the
      State of Ohio.

15. EFFECTIVE AND TERMINATION DATES

      The Plan shall become effective on the date it is approved by the
      shareholders of the Company. The Plan shall continue in effect for a
      period of five (5) years from its effective date unless sooner terminated
      by the Board, at which time all outstanding Awards shall remain
      outstanding in accordance with their applicable terms and conditions.


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