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


                                 FORM 10-Q

                              ---------------

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

               FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999

                       Commission File Number 1-3924


                                MAXXAM INC.
           (Exact name of Registrant as specified in its charter)



           DELAWARE                          95-2078752
 (State or other jurisdiction             (I.R.S. Employer
      of incorporation or              Identification Number)
         organization)


  5847 SAN FELIPE, SUITE 2600                   77057
        HOUSTON, TEXAS                       (Zip Code)
     (Address of Principal
      Executive Offices)



     Registrant's telephone number, including area code: (713) 975-7600



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 /  /

  Number of shares of common stock outstanding at May 3, 1999:  7,000,863



                             TABLE OF CONTENTS



PART I. - FINANCIAL INFORMATION


     Item 1.   Financial Statements:
          Consolidated Balance Sheet at March 31, 1999
               and December 31, 1998
          Consolidated Statement of Operations for the three
               months ended March 31, 1999 and 1998
          Consolidated Statement of Cash Flows for the three
               months ended March 31, 1999 and 1998
          Condensed Notes to Consolidated Financial Statements

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

     Item 3.   Quantitative and Qualitative Disclosures About
          Market Risk

PART II. - OTHER INFORMATION

     Item 1.   Legal Proceedings
     Item 6.   Exhibits and Reports on Form 8-K
     Signatures

APPENDIX A - GLOSSARY OF DEFINED TERMS

                        MAXXAM INC. AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEET
               (IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                   MARCH 31,    DECEMBER 31,
                                                      1999          1998
                                                 ------------  ------------
                                                  (Unaudited)
                     ASSETS
<S>                                              <C>           <C>
Current assets:
     Cash and cash equivalents                   $      189.0  $      294.2 
     Marketable securities                               34.5          19.4 
     Receivables:                                             
          Trade, net of allowance for doubtful
               accounts of $6.4 and $6.4,
               respectively                             197.4         184.5 
          Other                                         108.2         122.6 
     Inventories                                        558.0         587.5 
     Prepaid expenses and other current assets          153.3         152.4 
                                                 ------------  ------------
               Total current assets                   1,240.4       1,360.6 
     Property, plant and equipment, net of
          accumulated depreciation of $942.1 and
          $921.5, respectively                        1,263.9       1,278.9 
     Timber and timberlands, net of accumulated
          depletion of $176.0 and  $178.4,
          respectively                                  254.5         302.3 
Investments in and advances to unconsolidated
     affiliates                                         148.2         146.5 
Deferred income taxes                                   506.3         555.8 
Long-term receivables and other assets                  728.4         431.1 
                                                 ------------  ------------
                                                 $    4,141.7  $    4,075.2 
                                                 ============  ============
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Accounts payable                            $      158.7  $      182.9 
     Accrued interest                                    40.1          72.4 
     Accrued compensation and related benefits          127.4         133.7 
     Other accrued liabilities                          209.0         180.6 
     Payable to affiliates                               81.5          77.1 
     Short-term borrowings and current
          maturities of long-term debt                   44.4          37.0 
                                                 ------------  ------------
               Total current liabilities                661.1         683.7 
Long-term debt, less current maturities               1,957.6       1,971.7 
Accrued postretirement medical benefits                 701.3         704.5 
Other noncurrent liabilities                            619.8         604.8 
                                                 ------------  ------------
               Total liabilities                      3,939.8       3,964.7 
                                                 ------------  ------------
Commitments and contingencies
Minority interests                                      146.5         167.3 
                                                 ------------  ------------ 
Stockholders' equity (deficit):
     Preferred stock, $0.50 par value;
          12,500,000 shares authorized; Class A
          $0.05 Non-Cumulative Participating
          Convertible Preferred Stock;
          669,435 shares issued                            .3            .3 
     Common stock, $0.50 par value; 28,000,000
          shares authorized;
          10,063,359 shares issued                        5.0           5.0 
     Additional capital                                 222.8         222.8 
     Accumulated deficit                                (63.5)       (175.7)
     Treasury stock, at cost (shares held:
          preferred - 845; common:  3,062,496)         (109.2)       (109.2)
                                                 ------------  ------------ 
               Total stockholders' equity
                    (deficit)                            55.4         (56.8)
                                                 ------------  ------------ 
                                                 $    4,141.7  $    4,075.2 
                                                 ============  ============ 


<FN>

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

</TABLE>

                        MAXXAM INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF OPERATIONS
               (IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                            THREE MONTHS
                                                               ENDED
                                                             MARCH 31,
                                                    --------------------------
                                                         1999          1998
                                                    ------------  ------------
                                                            (UNAUDITED)
<S>                                                 <C>           <C>
Net sales:
     Aluminum operations                            $      479.4  $      597.0 
     Forest products operations                             46.7          51.9 
     Real estate and racing operations                      18.7          15.1 
                                                    ------------  ------------
                                                           544.8         664.0 
                                                    ------------  ------------

Costs and expenses:
     Cost of sales and operations:
          Aluminum operations                              459.9         497.1 
          Forest products operations                        39.8          33.1 
          Real estate and racing operations                 10.9           9.7 
     Selling, general and administrative expenses           39.4          42.2 
     Depreciation, depletion and amortization               30.0          30.6 
                                                    ------------  ------------
                                                           580.0         612.7 
                                                    ------------  ------------

Operating income (loss)                                    (35.2)         51.3 

Other income (expense):
     Gain on sale of Headwaters Timberlands                239.8             - 
     Investment, interest and other income                   9.3          11.6 
     Interest expense                                      (49.4)        (53.9)
                                                    ------------  ------------
Income before income taxes and minority interests          164.5           9.0 
Provision for income taxes                                 (67.4)         (3.2)
Minority interests                                          15.0          (3.9)
                                                    ------------  ------------
Net income                                          $      112.1  $        1.9 
                                                    ============  ============

Earnings per share:
     Basic                                          $      16.02  $       0.28 
                                                    ============  ============
     Diluted                                        $      14.35  $       0.25 
                                                    ============  ============ 


<FN>

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

</TABLE>


                        MAXXAM INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF CASH FLOWS
                          (IN MILLIONS OF DOLLARS)


<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                               March 31,
                                                      --------------------------
                                                           1999          1998
                                                      ------------  ------------
                                                              (Unaudited)
<S>                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                       $      112.1  $        1.9 
     Adjustments to reconcile net income to net cash               
          used for operating activities:
          Depreciation, depletion and amortization            30.0          30.6 
          Gain on sale of Headwaters Timberlands            (239.8)            - 
          Other gains on sales of real estate,
               mortgage loans and other assets                 (.5)         (2.0)
          Net gains on marketable securities                  (3.4)         (4.3)
          Net sales (purchases) of marketable
               securities                                    (11.7)          4.7 
          Minority interests                                 (15.0)          3.9 
          Amortization of deferred financing costs
               and discounts on long-term debt                 2.5           6.3 
          Equity in earnings of unconsolidated
               affiliates, net of dividends received          (4.9)         (4.5)
          Increase (decrease) in cash resulting from
               changes in:
          Receivables                                         11.1          30.0 
          Inventories                                         27.9          43.5 
          Prepaid expenses and other assets                    1.3           2.0 
          Accounts payable                                   (24.0)        (22.9)
          Accrued interest                                   (32.3)        (31.9)
          Accrued and deferred income taxes                   67.0          (4.7)
          Payable to affiliates and other accrued
               liabilities                                    23.4         (32.0)
          Long-term assets                                   (28.1)         (0.7)
          Long-term liabilities                               (4.0)        (12.0)
          Other                                               (1.8)         (0.2)
                                                      ------------  ------------ 
          Net cash provided by (used for) operating
               activities                                    (90.2)          7.7 
                                                      ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Net proceeds from sale of Headwaters Timberlands        299.9             - 
     Capital expenditures                                    (27.5)        (22.4)
     Restricted cash withdrawals used to acquire
          timberlands                                         10.3             - 
     Investments in subsidiaries and joint ventures              -          (1.6)
     Net proceeds from other dispositions of property
          and investments                                      0.6           6.5 
     Other                                                    (3.1)          3.1 
                                                      ------------  ------------ 
          Net cash provided by (used for) investing
               activities                                    280.2         (14.4)
                                                      ------------  ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under revolving credit agreements            -             - 
     Proceeds from issuance of long-term debt                  0.2           2.0 
     Redemptions, repurchases and principal payments
          on long-term debt                                   (6.8)        (12.7)
     Dividends paid to Kaiser's minority preferred
          stockholders                                           -             - 
     Redemption of preference stock                           (1.3)         (1.1)
     Restricted cash deposits                               (287.1)            - 
     Other                                                    (0.2)          2.5 
                                                      ------------  ------------ 
          Net cash used for financing activities            (295.2)         (9.3)
                                                      ------------  ------------ 
NET DECREASE IN CASH AND CASH EQUIVALENTS                   (105.2)        (16.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             294.2         164.6 
                                                      ------------  ------------ 
CASH AND CASH EQUIVALENTS AT END OF PERIOD            $      189.0  $      148.6 
                                                      ============  ============ 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Interest paid, net of capitalized interest       $       79.2  $       79.5 
     Income taxes paid                                         0.5           6.5 


<FN>

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

</TABLE>


                        MAXXAM INC. AND SUBSIDIARIES

            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      

1.        GENERAL

          The information contained in the following notes to the
consolidated financial statements is condensed from that which would appear
in the annual consolidated financial statements; accordingly, the
consolidated financial statements included herein should be reviewed in
conjunction with the consolidated financial statements and related notes
thereto contained in the Form 10-K.  Any capitalized terms used but not
defined in these Condensed Notes to Consolidated Financial Statements are
defined in the "Glossary of Defined Terms" contained in Appendix A.  All
references to the "Company" include MAXXAM Inc. and its subsidiary
companies unless otherwise indicated or the context indicates otherwise. 
Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end.  The results of operations for the
interim periods presented are not necessarily indicative of the results to
be expected for the entire year.

          The consolidated financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly
the consolidated financial position of the Company at March 31, 1999, the
consolidated results of operations for the three months ended March 31,
1999 and 1998 and the consolidated cash flows for the three months ended
March 31, 1999 and 1998.  Certain reclassifications of prior period
information have been made to conform to the current presentation.

          There were no reconciling items between net income and
comprehensive income in either of the three month periods ended March 31,
1999 and 1998.

          Labor Related Costs
          Kaiser is currently operating five of its United States
facilities with salaried employees and other workers as a result of the
September 30, 1998 strike by the USWA and the subsequent "lock-out" by
Kaiser in January 1999.  For purposes of computing the costs and
liabilities related to pension and other postretirement medical plans
reflected in the accompanying consolidated financial statements for the
quarter ended March 31, 1999, Kaiser based its accruals on the terms of the
previously existing (expired) USWA contract.  Any differences between the
amounts accrued and the amounts ultimately agreed to during the collective
bargaining process will be reflected in future results during the term of
any new contract.

          Recent Accounting Pronouncements
          SFAS No. 133 requires companies to recognize all derivative
instruments as assets or liabilities in the balance sheet and to measure
those instruments at fair value.  SFAS No. 133 must be adopted by the
Company no later than January 1, 2000, although earlier application is
permitted.  Under SFAS No. 133, the Company will be required to "mark-to-
market" its hedging positions at each period end in advance of the period
of recognition for the transaction to which the hedge relates.  Changes in
the fair value of the Company's open hedging positions will be reflected as
an increase or reduction in stockholders' equity through comprehensive
income.  The impact of the changes in fair value of the Company's hedging
positions will be reversed from comprehensive income (net of any
fluctuations in other "open" positions) and will be reflected in
traditional net income upon the occurrence of the transaction to which the
hedge relates.  Currently, the dollar amount of the Company's comprehensive
income adjustments is not significant so there is not a significant
difference between "traditional" net income and comprehensive income. 
However, differences between comprehensive income and traditional net
income may become significant in future periods as adoption of SFAS No. 133
will result in fluctuations in comprehensive income and stockholders'
equity in periods of price volatility, despite the fact that the Company's
cash flow and earnings will be "fixed" to the extent hedged.  The amount of
such fluctuations could be significant.  The Company is currently
evaluating how and when to implement SFAS No. 133.

2.        SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

          Headwaters Transactions
          As described in Note 7 below, on September 28, 1996, the Pacific
Lumber Parties entered into the Headwaters Agreement with the United States
and California which provided the framework for the acquisition by the
United States and California of the Headwaters Timberlands.  A substantial
portion of the Headwaters Timberlands contains virgin old growth timber. 
Approximately 4,900 of these acres were owned by Salmon Creek, with the
remaining acreage being owned by the Scotia LLC (Pacific Lumber owning the
timber and related timber harvesting rights on this acreage).  On March 1,
1999, the Pacific Lumber Parties, the United States and California
consummated the Headwaters Agreement.  Salmon Creek received $299.9 million
for its 4,900 acres, and  for its 700 acres, Pacific Lumber received the
7,700 acre Elk River Timberlands which are to be contributed to Scotia LLC
on or before August 1999.  Of these proceeds, $285.0 million has been
deposited into an escrow account held by an escrow agent and are to be made
available as necessary to support the Timber Notes, and may be released
only under certain circumstances.  As of March 31, 1999, the Escrowed Funds
were $286.0 million which includes interest earned.

          As a result of the disposition of the Headwaters Timberlands, the
Company recognized a pre-tax gain of $239.8 million ($142.1 million net of
deferred taxes or $18.17 per share) in the first quarter of 1999.  This
amount represents the gain attributable to the portion of the Headwaters
Timberlands for which the Company received $299.9 million in cash.  With
respect to the remaining portion of the Headwaters Timberlands for which
the Company received the Elk River Timberlands, no gain has been recognized
as this represented an exchange of substantially similar productive assets. 
These timberlands have been reflected in the Company's financial statements
at an amount which represents the Company's historical cost for the
timberlands which were transferred to the United States.

          Scotia LLC and Pacific Lumber also entered in the Owl Creek
Agreement and the Grizzly Creek Agreement with California regarding the
future sale to California of the Owl Creek and Grizzly Creek groves.    The
Owl Creek Agreement provides for Scotia LLC to sell the Owl Creek Grove to
California, on or before June 30, 2002, for the lesser of the appraised
fair market value or $79.7 million.  At California's option, 25% of the
payment may be paid upon closing with three equal annual installments
thereafter and without interest.  With respect to the Grizzly Creek
Agreement, California may purchase from Pacific Lumber, on or before
October 31, 2000, a portion of this grove for a purchase price determined
based on fair market value, but not to exceed $19.9 million.  The net
proceeds from the Grizzly Creek grove will be placed into an escrow account
(on the same basis as the net proceeds from the sale of the Headwaters
Timberlands) unless, at the time of receipt of such proceeds, the Escrowed
Funds are no longer held in an escrow account.  California also has a five
year option under the agreement to purchase additional property adjacent to
the Grizzly Creek grove.  The sale of the Owl Creek grove or Grizzly Creek
grove will not be reflected in the Company's financial statements until it
has been concluded.

          Acquisition of Remaining Minority Interest in KLHP

          In February 1999, KACC, through a subsidiary, completed the
acquisition of its joint venture partner's 45% interest in KLHP for a cash
purchase price of approximately $10.0 million.  As KACC already owned 55%
of KLHP, the results of KLHP are already included in the Company's
consolidated financial statements.

3.        INVENTORIES

          Inventories consist of the following (in millions):


<TABLE>
<CAPTION>

                                                   March 31,    December 31,
                                                      1999          1998
                                                 ------------  ------------
<S>                                              <C>           <C>
Aluminum operations:
     Finished fabricated aluminum products       $      121.9  $      112.4
     Primary aluminum and work in process               168.0         205.6
     Bauxite and alumina                                120.2         109.5
     Operating supplies and repair and
          maintenance parts                             118.6         116.0
                                                 ------------  ------------
                                                        528.7         543.5
                                                 ------------  ------------
Forest products operations:
     Lumber                                              28.3          36.0
     Logs                                                 1.0           8.0
                                                 ------------  ------------
                                                         29.3          44.0
                                                 ------------  ------------
                                                 $      558.0  $      587.5
                                                 ============  ============


</TABLE>

4.        RESTRICTED CASH

          Cash and cash equivalents include restricted cash of $80.6
million and $96.1 million at March 31, 1999 and December 31, 1998,
respectively, which is being held as security for short positions in
marketable securities and  for debt service payments on the Timber Notes.  

          Long-term receivables and other assets include restricted cash in
the amount of  $294.3 million and $17.5 million at March 31, 1999 and
December 31, 1998, respectively. Restricted cash at March 31, 1999
primarily consists of the Escrowed Funds and funds held in the Prefunding
Account.  Restricted cash at December 31, 1998 primarily consists of funds
held in the Prefunding Account. 

5.        LONG-TERM DEBT

          Long-term debt consists of the following (in millions):


<TABLE>
<CAPTION>

                                                    March 31,    December 31,
                                                       1999          1998
                                                  ------------  ------------
<S>                                               <C>           <C>
12% MGHI Senior Secured Notes due August 1, 2003  $      130.0  $      130.0 
Pacific Lumber Credit Agreement                              -             - 
7.43% Scotia LLC Timber Collateralized Notes due
     July 20, 2028                                       861.9         867.2 
1994 KACC Credit Agreement                                   -             - 
10-7/8% KACC Senior Notes due October 15, 2006,
     including premium                                   225.7         225.7 
9-7/8% KACC Senior Notes due February 15, 2002,
     net of discount                                     224.4         224.4 
12-3/4% KACC Senior Subordinated Notes due
     February 1, 2003                                    400.0         400.0 
Alpart CARIFA Loans                                       60.0          60.0 
Other aluminum operations debt                            52.6          52.9 
Other notes and contracts, primarily secured by
     receivables, buildings, real estate
     and equipment                                        29.0          30.0 
                                                  ------------  ------------
                                                       1,983.6       1,990.2 
          Less: current maturities                       (26.0)        (18.5)
                                                  ------------  ------------
                                                  $    1,957.6  $    1,971.7 
                                                  ============  ============ 


</TABLE>

6.        PER SHARE INFORMATION

          Basic earnings per share is calculated by dividing net income by
the weighted average number of common shares outstanding during the period
including the weighted average impact of the shares of common stock issued
and treasury stock acquired during the period from the date of issuance or
repurchase.  The weighted average common shares outstanding was 7,000,863
shares and 7,000,597 shares for the three months ended March 31, 1999 and
1998, respectively.

          Diluted earnings per share calculations also include the dilutive
effect of the Class A Preferred Stock which is convertible into Common
Stock as well as common and preferred stock options.  The weighted average
number of common and common equivalent shares was 7,817,077 shares and
7,797,515 shares for the three months ended March 31, 1999 and 1998,
respectively.

7.        CONTINGENCIES

     Aluminum Operations

          Environmental Contingencies
          Kaiser and KACC are subject to a number of environmental laws and
regulations, to fines or penalties assessed for alleged breaches of the
environmental laws and regulations, and to claims and litigation based upon
such laws.  KACC is currently subject to a number of claims under CERCLA
and, along with certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites listed on
the National Priorities List under CERCLA.

          Based on Kaiser's evaluation of these and other environmental
matters, Kaiser has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters.  At March 31, 1999, the balance of such accruals, which are
primarily included in other noncurrent liabilities, was $50.5 million. 
These environmental accruals represent Kaiser's estimate of costs
reasonably expected to be incurred based on presently enacted laws and
regulations, currently available facts, existing technology and Kaiser's
assessment of the likely remediation action to be taken.  Kaiser expects
that these remediation actions will be taken over the next several years
and estimates that annual expenditures to be charged to these environmental
accruals will be approximately $3.0 million to $8.0 million for the years
1999 through 2003 and an aggregate of approximately $29.0 million
thereafter.

          As additional facts are developed and definitive remediation
plans and necessary regulatory approvals for implementation of remediation
are established or alternative technologies are developed, changes in these
and other factors may result in actual costs exceeding the current
environmental accruals.  As the resolution of these matters is subject to
further regulatory review and approval, no specific assurances can be given
as to when the factors upon which a substantial portion of this estimate is
based can be expected to be resolved.  However, Kaiser is working to
resolve these matters.  Kaiser believes that it has insurance coverage
available to recover certain incurred and future environmental costs and is
actively pursuing claims in this regard.  No assurances can be given that
Kaiser will be successful in its attempts to recover incurred or future
costs from insurers or that the amount of recoveries received will
ultimately be adequate to cover costs incurred.  While uncertainties are
inherent in the final outcome of these environmental matters, and it is
impossible to determine the actual costs that ultimately may be incurred,
management believes that the resolution of such uncertainties should not
have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.

          Asbestos Contingencies
          KACC is a defendant in a number of lawsuits, some of which
involve claims of multiple persons, in which the plaintiffs allege that
certain of their injuries were caused by, among other things, exposure to
asbestos during, and as a result of, their employment or association with
KACC or exposure to products containing asbestos produced or sold by KACC. 
The lawsuits generally relate to products KACC has not manufactured for at
least 20 years.  At March 31, 1999, the number of claims pending was
approximately 91,300 compared to 86,400 at December 31, 1998.  During 1998,
approximately 22,900 of such claims were received and 13,900 were settled
or dismissed.  During the quarter ended March 31, 1999, approximately 9,300
of such claims were received and 4,400 of such claims were settled or
dismissed.  However, the foregoing claim and settlement figures as of and
for the quarter ended March 31, 1999, do not reflect the fact that as of
March 31, 1999, KACC reached agreements under which it will settle
approximately 26,000 of the pending asbestos-related claims over an
extended period.

          Based on past experience and reasonably anticipated future
activity, Kaiser has established an accrual for estimated asbestos-related
costs for claims filed and estimated to be filed through 2008.  There are
inherent uncertainties involved in estimating asbestos-related costs and
KACC's actual costs could exceed these estimates.  Kaiser's accrual was
calculated based on the current and anticipated number of asbestos-related
claims, the prior timing and amounts of asbestos-related payments, and the
advice of Wharton Levin Ehrmantraut Klein & Nash, P. A. with respect to the
current state of the law related to asbestos claims.  Accordingly, an
asbestos-related cost accrual of $187.7 million, before consideration of
insurance recoveries, is included primarily in other noncurrent liabilities
at March 31, 1999.  While Kaiser does not believe there is a reasonable
basis for estimating such costs beyond 2008 and, accordingly, no accrual
has been recorded for such costs which may be incurred beyond 2008, there
is a reasonable possibility that such costs may continue beyond 2008, and
such costs may be substantial.  Kaiser estimates that annual future cash
payments in connection with such litigation will be approximately $17.0
million to $28.0 million for each of the years 1999 through 2003, and an
aggregate of approximately $79.0 million thereafter.

          Kaiser believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs.  Although
Kaiser has settled asbestos-related coverage matters with certain of its
insurance carriers, other carriers have not yet agreed to settlements.  The
timing and amount of ultimate recoveries from these insurance carriers will
depend on the pace of claims review and processing by such carriers and on
the resolution of any disputes regarding coverage under such policies. 
Kaiser believes that substantial recoveries from insurance carriers
are probable.  Kaiser reached this conclusion after considering its prior
insurance-related recoveries in respect of asbestos-related claims,
existing insurance policies, and the advice of Heller Ehrman White &
McAuliffe with respect to applicable insurance coverage law relating to the
terms and conditions of those policies.  Accordingly, an estimated
aggregate insurance recovery of $157.3 million, determined on the same
basis as the asbestos-related cost accrual, is recorded primarily in long-
term receivables and other assets at March 31, 1999.

          Kaiser continues to monitor claims activity, the status of
lawsuits (including settlement initiatives), legislative developments, and
costs incurred in order to ascertain whether an adjustment to the existing
accruals should be made to the extent that historical experience may differ
significantly from Kaiser's underlying assumptions.  While uncertainties
are inherent in the final outcome of these asbestos matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred and insurance recoveries that will be received, the Company
believes that, based on the factors discussed in the preceding paragraphs,
the resolution of asbestos-related uncertainties and the incurrence of
asbestos-related costs net of related insurance recoveries should not have
a material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.

          Labor Matters
          In connection with the USWA strike and subsequent lock-out by
KACC, certain allegations of ULPs have been filed with the National Labor
Relations Board by the USWA.  KACC is responding to all such allegations
and believes that they are without merit.  If the allegations were
sustained, KACC could be required to make locked-out employees whole for
back wages from the date of the lock-out in January 1999.  While
uncertainties are inherent in the final outcome of such matters, the
Company believes that the resolution of the alleged ULPs should not result
in a material adverse effect on its financial position, results of
operations, or liquidity.

          Forest Products Operations
          Regulatory and environmental matters play a significant role in
the Company's business, which is subject to a variety of California and
federal laws and regulations, as well as the Final HCP, Final SYP and 1999
TOL, dealing with timber harvesting practices, threatened and endangered
species and habitat for such species, and air and water quality.  While
regulatory and environmental concerns have resulted in restrictions on the
geographic scope and timing of the Company's timber operations, increased
operational costs and engendered litigation and other challenges to the
Company's operations, prior to 1998 they had not had a significant adverse
effect on the Company's financial position, results of operations or
liquidity.  However, the Company's first quarter 1999 and year ended 1998
results of operations were adversely affected by certain regulatory and
environmental matters, including during the second half of 1998 through the
date of this report, the absence of a sufficient number of available THPs
to enable the Company to conduct its operations at historic levels.

          On September 28, 1996, the Pacific Lumber Parties entered  into
the Headwaters Agreement with the United States and California which
provided the framework for the acquisition of the Headwaters Timberlands by
the United States and California. Consummation of the Headwaters Agreement
was also conditioned upon, among other things,  approval of an SYP,
approval of a Multi-Species HCP and issuance of the Permits.  As further
described in Note 2 "Headwaters Transactions," on March 1, 1999, the
Pacific Lumber Parties, the United States and California consummated the
Headwaters Agreement.  In addition to the transfer of the Headwaters
Timberlands by the Pacific Lumber Parties described in Note 2, the Final
SYP and the Final HCP were approved and the Permits were issued.  The
Pacific Lumber Parties and California also executed the California
Agreement. 

           The Final SYP complies with certain California Board of Forestry
regulations requiring timber companies to project timber growth and harvest
on their timberlands over a 100-year planning period and establish an LTSY
harvest level.  An SYP must demonstrate that the average annual harvest
over any rolling ten-year period will not exceed the LTSY harvest level and
that a timber company's projected timber inventory is capable of sustaining
the LTSY harvest level in the last decade of the 100-year planning period.
The Final SYP is effective for 10 years and may be amended by Pacific
Lumber subject to approval by the CDF.  The Final SYP is subject to review
after five years.  Revised SYPs would be prepared every decade that address
the LTSY harvest level based upon reassessment of changes in the resource
base and other factors.

          Several species, including the northern spotted owl, the marbled
murrelet, the coho salmon and the steelhead trout, have been listed as
endangered or threatened under the ESA and/or the CESA. The Final HCP and
the Permits allow incidental "take" of these and certain other listed
species so long as there is no "jeopardy" to the continued existence of
such species.  The Final HCP identifies the measures to be instituted in
order to minimize and mitigate the anticipated level of take to the
greatest extent practicable.  The Final HCP  not only provides for the
Company's compliance with habitat requirements for the northern spotted
owl, the marbled murrelet, the coho salmon and the steelhead trout, it also
provides for issuance of Permits for thirteen additional species that are
or may be listed in the future.  The Final HCP and related Permits have a
term of 50 years, and, among other things, include the following protective
measures: (i) setting aside timberlands as marbled murrelet conservation
areas; (ii) establishing streamside "no-cut" and limited cut buffers as
well as mass wasting areas based on an assessment of each of the Company's
watersheds to be completed within five years; (iii) limiting harvesting
activities during certain times of the year and during wet weather
conditions, and (iv) making certain specified improvements to the Company's
roads.   The Final SYP is also subject to the foregoing provisions. The
Company believes that the Final SYP and the Final HCP should in the long-
term expedite the preparation and facilitate approval of its THPs, although
there can be no assurance that the Company will not face difficulties in
the THP submission and approval process as it implements these agreements.

          Under the Federal Clean Water Act, the EPA is required to
establish TMDLs in water courses that have been declared to be "water
quality impaired."  The EPA and the North Coast Regional Water Quality
Control Board are in the process of establishing TMDLs for seventeen
northern California rivers and certain of their tributaries, including
certain water courses that flow within the Company's timberlands.  The
final TMDL requirements applicable to the Company's timberlands may require
aquatic measures that are different from or in addition to the
prescriptions to be developed pursuant to the watershed analysis process
contained in the Final HCP.

          Lawsuits are pending and threatened which seek to prevent the
Company from implementing the Final HCP and/or the Final SYP, implementing
certain of the Company's approved THPs or carrying out certain other
operations.  On August 12, 1998, the EPIC lawsuit was filed by two
environmental groups against Pacific Lumber, Scotia Pacific and Salmon
Creek under which the environmental groups allege that certain procedural
violations of the ESA have resulted from logging activities on the
Company's timberlands and seek to prevent the defendants from carrying out
any harvesting activities under certain THPs until certain wildlife
consultation requirements under the ESA are satisfied.  On March 15, 1999,
the court affirmed a preliminary injunction preventing harvesting on three
THPs; however, it subsequently heard Pacific Lumber's motion to dismiss the
case and issued an order for the plaintiffs to show cause why the lawsuit
should not be dismissed as moot since the consultation requirement appears
to have been concluded upon approval of the Final HCP.  On May 5, 1999, the
court dissolved the preliminary injunction, granted the defendants' motion
for summary judgment and dismissed the case as moot.  On or about January 29,
1999, the Company received the EPIC Notice Letter which alleges various
violations of the ESA and challenges, among other things, the validity and
legality of the Permits.  On March 31, 1999, the EPIC-SYP/Permits lawsuit
was filed which alleges various violations of the CESA and CEQA, and
challenges, among other things, the validity and legality of the Permits
issued by California and the Final SYP.  On March 31, 1999, the USWA lawsuit
was filed which also challenges the validity and legality of the Final SYP.
The Company believes that appropriate procedures were followed throughout
the public review and approval process concerning the Final Plans, and the
Company is working with the relevant state and federal agencies to defend
these challenges.  Although uncertainties are inherent in the final outcome
of the EPIC Notice Letter, the EPIC-SYP/Permits lawsuit and the USWA lawsuit,
the Company believes that the resolution of these matters should not result
in a material adverse effect on its financial condition or results of
operations or the ability to harvest timber.  While the Company expects
environmentally focused objections and lawsuits to continue, it believes
that the Final HCP, Final SYP and the Permits should enhance its position
in connection with these continuing challenges and, over time, reduce or
minimize such challenges. 

          OTS Contingency and Related Matters
          On December 26, 1995, the OTS initiated a formal administrative
proceeding against the Company and others by filing the Notice.  The Notice
alleges, among other things, misconduct by the Company, Federated, Mr.
Charles Hurwitz and others (the "respondents") with respect to the failure
of USAT, a wholly owned subsidiary of UFG.  At the time of receivership,
the Company owned approximately 13% of the voting stock of UFG.  The Notice
claims that the Company was a savings and loan holding company, that with
others it controlled USAT, and that it was therefore obligated to maintain
the net worth of USAT.  The Notice makes numerous other allegations against
the Company and the other respondents, including, among other things,
allegations that through USAT it was involved in prohibited transactions
with Drexel, Burnham, Lambert Inc.  The OTS, among other things, seeks
unspecified damages in excess of $560.0 million from the Company and
Federated, civil money penalties and a removal from, and prohibition
against the Company and the other respondents engaging in, the banking
industry.  The hearing on the merits of this matter commenced on September
22, 1997 and concluded on March 1, 1999.   Post trial briefing is expected
to continue at least through November 1999.  A recommended decision by the
Administrative Law Judge is not expected any sooner than late 1999.  A
final agency decision would be issued by the OTS Director thereafter.  Such
decision would then be subject to appeal by any of the parties to the
federal appellate court and, if adverse to the respondents, subject to
bonding.  On February 10, 1999, the OTS and FDIC settled with the all the
respondents except Mr. Hurwitz, the Company and Federated for $1.0 million
and limited cease and desist orders.  

          On August 2, 1995, the FDIC filed the FDIC action in the U.S.
District Court for the Southern District of Texas.  The original complaint
against Mr. Hurwitz alleged damages in excess of $250.0 million based on
the allegation that Mr. Hurwitz was a controlling shareholder, de facto
senior officer and director of USAT, and was involved in certain decisions
which contributed to the insolvency of USAT.  The original complaint
further alleged, among other things, that Mr. Hurwitz was obligated to
ensure that UFG, Federated and the Company maintained the net worth of
USAT.  On January 15, 1997, the FDIC filed an amended complaint which
seeks, conditioned on the OTS prevailing in its administrative proceeding,
unspecified damages from Mr. Hurwitz relating to amounts the OTS does not
collect from the Company and Federated with respect to their alleged
obligations to maintain USAT's net worth.

          The Company's bylaws provide for indemnification of its officers
and directors to the fullest extent permitted by Delaware law.  The Company
is obligated to advance defense costs to its officers and directors,
subject to the individual's obligation to repay such amount if it is
ultimately determined that the individual was not entitled to
indemnification.  In addition, the Company's indemnity obligation can,
under certain circumstances, include amounts other than defense costs,
including judgments and settlements.  The Company has concluded that it is
unable to determine a reasonable estimate of the loss (or range of loss),
if any, that could result from these contingencies.  Accordingly, it is
impossible to assess the ultimate outcome of the foregoing matters or their
potential impact on the Company; however, any adverse outcome of these
matters could have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity.

          Other Matters
          The Company is involved in various other claims, lawsuits and
other proceedings relating to a wide variety of matters.  While
uncertainties are inherent in the final outcome of such matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred, management believes that the resolution of such uncertainties and
the incurrence of such costs should not have a material adverse effect on
the Company's consolidated financial position, results of operations or
liquidity.

8.   DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

          At March 31, 1999, the net unrealized gain on KACC's position in
aluminum forward sales and option contracts,  energy forward purchase and
option contracts, and forward foreign exchange contracts, was approximately
$28.9 million (based on comparisons to applicable quarter-end published
market prices).  As KACC's hedging activities are generally designed to
lock-in a specified price or range of prices, gains or losses on the
derivative contracts utilized in these hedging activities will generally be
offset by losses or gains, respectively, on the transactions being hedged.

          Alumina and Aluminum
          Kaiser's earnings are sensitive to changes in the prices of
alumina, primary aluminum and fabricated aluminum products, and also depend
to a significant degree upon the volume and mix of all products sold. 
Primary aluminum prices have historically been subject to significant
cyclical fluctuations.  Since 1993, the AMT Price for primary aluminum has
ranged from approximately $.50 to $1.00 per pound.  Alumina prices as well
as fabricated aluminum product prices (which vary considerably among
products) are significantly influenced by changes in the price of primary
aluminum but generally lag behind primary aluminum price changes by up to
three months.

          From time to time in the ordinary course of business, KACC enters
into hedging transactions to provide price risk management in respect of
the net exposure of earnings and cash flows resulting from (i) anticipated
sales of alumina, primary aluminum and fabricated aluminum products, less
(ii) expected purchases of certain items, such as aluminum scrap, rolling
ingot, and bauxite, whose prices fluctuate with the price of primary
aluminum.  Forward sales contracts are used by KACC to effectively fix the
price that KACC will receive for its shipments.  KACC also uses option
contracts (i) to establish a minimum price for its product shipments, (ii)
to establish a "collar" or range of prices for KACC's anticipated sales,
and/or (iii) to permit KACC to realize possible upside price movements.  As
of March 31, 1999, KACC had sold forward, at fixed prices, approximately
18,000 tons of primary aluminum with respect to 1999.  As of March 31,
1999, KACC had also entered into option contracts that established a price
range for an additional 144,000, and 323,000 tons of primary aluminum for
1999 and 2000, respectively. 

          Additionally, through March 31, 1999, KACC had also entered a
series of transactions with a counterparty that will provide KACC with a
premium over the forward market prices at the date of the transaction for
4,000 tons of primary aluminum per month during the period July 1999
through June 2001.  KACC also contracted with the counterparty to receive
certain fixed prices (also above the forward market prices at the date of
the transaction) on 8,000 tons of primary aluminum per month over a three
year period commencing October 2001, unless market prices during certain
periods decline below a stipulated "floor" price, in which case, the fixed
price sales portion of the transactions terminate.  The price at which the
October 2001 and later transactions terminate is well below current market
prices.  While Kaiser believes that the October 2001 and later transactions
are consistent with its stated hedging objectives, these positions do not
qualify for treatment as a "hedge" under current accounting guidelines.
Accordingly, these positions will be "marked to market" each period.  For
the quarter ended March 31, 1999, Kaiser recorded a mark-to-market charge
of approximately $0.5 million in other income (expense) associated with the
above transactions.

          As of March 31, 1999, KACC had sold forward virtually all of the
alumina available to it in excess of its projected internal smelting
requirements for 1999, 2000 and 2001 at prices indexed to future prices of
primary aluminum.

          Energy
          KACC is exposed to energy price risk from fluctuating prices for
fuel oil and natural gas consumed in the production process.  Accordingly,
KACC from time to time in the ordinary course of business enters into
hedging transactions with major suppliers of energy and energy related
financial instruments.  As of March 31, 1999, KACC had a combination of
fixed price purchase and option contracts for the purchase of approximately
32,700 MMBtu of natural gas per day during the remainder of 1999.  As of
March 31, 1999, KACC also held a combination of fixed price purchase and
option contracts for an average of 246,000 and 179,000 barrels per month of
fuel oil and diesel fuel for 1999 and 2000, respectively.

          Foreign Currency
          KACC enters into forward exchange contracts to hedge material
cash commitments to foreign subsidiaries or affiliates.  At March 31, 1999,
KACC had net forward foreign exchange contracts totaling approximately
$132.3 million for the purchase of 198.6 Australian dollars from April
1999, through December 2000, in respect of its commitments for the
remainder of 1999 through 2000 expenditures denominated in Australian
dollars.

9.   SEGMENT INFORMATION

     The following table presents financial information by reportable
segment (in millions).


<TABLE>
<CAPTION>

                                                Forest        Real       Racing                Consolidated
                                   Aluminum    Products      Estate    Operations   Corporate      Total
                                  ---------- ------------  ---------- -----------  ----------  ------------
<S>                               <C>        <C>           <C>        <C>          <C>         <C>
Net sales to unaffiliated
     customers for the
     three months ended:
          March 31, 1999          $   479.4  $      46.7   $     10.6 $       8.1  $        -  $     544.8 
          March 31, 1998              597.0         51.9          8.5         6.6           -        664.0 
Operating income (loss) for the
     three months ended:
          March 31, 1999              (31.5)        (1.4)        (2.1)        2.3        (2.5)       (35.2)
          March 31, 1998               46.3         10.1         (2.5)        0.9        (3.5)        51.3 

Depreciation, depletion and
     amortization for the three
     months ended:
          March 31, 1999               22.9          4.9          1.9         0.2         0.1         30.0 
          March 31, 1998               23.9          5.6          0.7         0.3         0.1         30.6 
Total assets as of:
          March 31, 1999            2,872.4        869.1        185.9        36.5       177.8      4,141.7 
          December 31, 1998         2,928.7        682.6        194.6        36.3       233.0      4,075.2 


</TABLE>

          Operating income (loss) in the column entitled "Corporate"
represents corporate general and administrative expenses not directly
attributable to the reportable segments.  This column also serves to
reconcile the total of the reportable segments' amounts to totals in the
Company's consolidated financial statements.  The reconciling amounts for
total assets for March 31, 1999 and December 31, 1998 are primarily related
to deferred tax assets.  The increase in assets for the forest products
segment between periods is primarily due to the deposit of $285.0 million
of Escrowed Funds related to the sale of the Headwaters Timberlands.

10.  SUBSEQUENT EVENT

          On April 1, 1999, KACC completed the previously announced sale of
its 50% interest in AKW, an aluminum wheels joint venture, to its partner,
Accuride Corporation.  The sale will result in the Company recognizing a
net pre-tax gain of approximately $50.0 million in the second quarter of
1999.  The Company's equity in income of AKW was $2.5 million and $1.1
million for the quarters ended March 31, 1999 and 1998, respectively.


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

          The following should be read in conjunction with the response to
Part I, Item 1 of this Report and Items 7 and 8 of the Form 10-K.  Any
capitalized terms used but not defined in this Item are defined in the
"Glossary of Defined Terms" contained in Appendix A.

          This Quarterly Report on Form 10-Q contains statements which
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  These statements appear in a
number of places in this section, in Item 3. "Quantitative and Qualitative
Disclosures About Market Risk" and in Part II.  Item 1.  "Legal
Proceedings."  Such statements can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "estimates,"
"will," "should," "plans" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of
strategy.  Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in
the forward-looking statements as a result of various factors.  These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, developments in technology, new
or modified statutory or regulatory requirements and changing prices and
market conditions.  This Form 10-Q and the Form 10-K identify other factors
that could cause such differences.  No assurance can be given that these
are all of the factors that could cause actual results to vary materially
from the forward-looking statements.

RESULTS OF OPERATIONS

          The Company operates in four principal industries: aluminum,
through its majority owned subsidiary, Kaiser, an integrated aluminum
producer; forest products, through MGI and its wholly owned subsidiaries,
principally Pacific Lumber and Britt; real estate investment and
development, managed through MPC; and racing operations through SHRP, Ltd. 
MGHI owns 100% of MGI and is a wholly owned subsidiary of the Company.  All
references to the "Company," "Kaiser," "MGHI," "MGI," "Pacific Lumber,"
"MPC" and "SHRP, Ltd." refer to the respective companies and their
subsidiaries, unless otherwise indicated or the context indicates
otherwise.

     ALUMINUM OPERATIONS

          Aluminum operations account for a substantial portion of the
Company's revenues and operating results.  Kaiser, through its principal
subsidiary KACC, operates in four business segments: bauxite and alumina,
primary aluminum, flat rolled products and engineered products.  Kaiser
uses a portion of its bauxite, alumina and primary aluminum production for
additional processing at certain of its downstream facilities. 
Intersegment transfers are valued at estimated market prices.

          Recent Events and Developments

          Labor Matters
          Substantially all of KACC's hourly workforce at its Gramercy,
Louisiana, alumina refinery, Mead and Tacoma, Washington, aluminum
smelters, Trentwood, Washington, rolling mill, and Newark, Ohio, extrusion
facility were covered by a master labor agreement with the USWA which
expired on September 30, 1998.  The parties did not reach an agreement
prior to the expiration of the master agreement and the USWA chose to
strike.  As previously announced, in January 1999 KACC declined an offer by
the USWA to have the striking workers return to work at the five plants
without a new agreement.  KACC imposed a lock-out to support its bargaining
position and continues to operate the plants with salaried employees and
other workers as it has since the strike began.  Based on operating results
to date, Kaiser believes that a significant business interruption will not
occur.

          KACC and the USWA continue to communicate; however, no formal
schedule for bargaining sessions has been developed at this time.  The
objective of Kaiser has been, and continues to be, to negotiate a fair
labor contract that is consistent with its business strategy and the
commercial realities of the marketplace.

          As a result of the USWA strike, Kaiser temporarily curtailed
three out of a total of eleven potlines at its Mead and Tacoma, Washington,
aluminum smelters at September 30, 1998 (representing approximately 70,000
tons of annual production capacity out of a total combined production
capacity of 273,000 tons per year at the facilities.) As previously
announced, in February 1999, KACC began restarting the two curtailed
potlines at its Mead smelter representing approximately 50,000 tons of the
previously idle capacity.  The first of the two Mead potlines was restarted
in March 1999.  The second of the two Mead potlines is currently expected
to commence restart activity during the second quarter of 1999, although it
may not be fully operational until the third quarter of the year.  KACC has
also announced that it has completed preparations to restart the 20,000
tons of idle capacity at its Tacoma smelter.  However, the timing for any
restart of the Tacoma potline has yet to be determined and will depend upon
market conditions and other factors.

          While Kaiser initially experienced an adverse strike-related
impact on its profitability, Kaiser currently believes that KACC's
operations at the affected facilities have been substantially stabilized
and will be able to run at, or near, full capacity, and that the effect of
the incremental costs associated with operating the affected plants during
the dispute were eliminated or substantially reduced as of January 1999
(excluding the impact of costs related to the restarts discussed above and
the effect of market factors such as the continued market-related
curtailment at the Tacoma smelter).  However, no assurances can be given
that KACC's efforts to run the plants on a sustained basis, without a
significant business interruption or material adverse impact on Kaiser's
operating results, will be successful.

          Strategic Initiatives
          Kaiser has devoted significant efforts analyzing its existing
asset portfolio with the intent of focusing its efforts and capital in
sectors of the industry that are considered most attractive, and in which
Kaiser believes it is well positioned to capture value.  The initial steps
of this process resulted in the June 1997 acquisition of the Bellwood
extrusion facility, the May 1997 formation of AKW, the rationalization of
certain of Kaiser's engineered products operations, Kaiser's investment to
expand its production capacity for heat treat flat-rolled products at its
Trentwood, Washington, rolling mill, and Kaiser's fourth quarter 1998
decision to seek a strategic partner for further development and deployment
of KACC's Micromill(TM) technology.  This process has continued in 1999. 
In February 1999, KACC completed the acquisition of the remaining 45%
interest in KLHP, an alumina marketing venture, from its joint venture
partner for a cash purchase price of approximately $10.0 million.
Additionally, in April 1999, KACC sold its 50% interest in AKW to its joint
venture partner for approximately $70 million in cash proceeds.  The
transaction will result in Kaiser recognizing a pre-tax gain of
approximately $50 million in the second quarter of 1999.  See Note 2 to the
Consolidated Financial Statements.

          Another area of emphasis has been a continuing focus on managing
Kaiser's legacy liabilities, including Kaiser's active pursuit of claims in
respect of insurance coverage for certain incurred and future environmental
costs, as evidenced by Kaiser's fourth quarter 1998, receipt of recoveries
totaling approximately $35.0 million related to current and future claims
against certain of its insurers. 

          Valco Operating Level
          Kaiser's Valco smelter operated only one of its five potlines
during most of 1998, although, on average, two potlines were operated
during most of the first quarter of 1998.  Each of Valco's potlines is
capable of producing approximately 40,000 tons of primary aluminum per
year.  Valco earned compensation in 1998 (in the form of energy credits to
be utilized over the last half of 1998 and during 1999) from the VRA in
lieu of the power necessary to run two of the potlines that were curtailed
during 1998.  The compensation substantially mitigated the financial impact
in 1998 of the curtailment of such lines.  Valco did not receive any
compensation from the VRA for one additional potline which was curtailed in
January 1998.  Valco currently expects to operate an average of three lines
during 1999.  As of April 30, 1999, two of the previously curtailed
potlines had been restarted.  Valco has notified the VRA that it believes
it had the contractual rights at the beginning of 1998 and 1999 to
sufficient energy to run four and one-half potlines for the balance of both
years.  Valco continues to seek compensation from the VRA with respect to
the 1998 and 1999 reductions in its power allocation.  Valco and the VRA
also are in continuing discussions concerning other matters, including
steps that might be taken to reduce the likelihood of power curtailments in
the future.  No assurances can be given as to the success of these
discussions.

          Summary
          The following table presents selected operational and financial
information for the three months ended March 31, 1999 and 1998. 


<TABLE>
<CAPTION>

                                                                  THREE MONTHS
                                                                     ENDED 
                                                                   MARCH 31, 
                                                  -----------------------------------------
                                                       1999                        1998 
                                                  ---------------           ---------------
                                                            (IN MILLIONS OF DOLLARS,
                                                          EXCEPT SHIPMENTS AND PRICES)
<S>                                               <C>                         <C>
Shipments:(1)
     Alumina:
          Third party                                     487.0                       424.6 
          Intersegment                                    150.3                       215.8 
                                                  -------------               -------------
               Total alumina                              637.3                       640.4 
                                                  -------------               -------------
     Primary aluminum:
          Third party                                      62.9                        80.5 
          Intersegment                                     39.5                        43.6 
                                                  -------------               -------------
               Total primary aluminum                     102.4                       124.1 
                                                  -------------               -------------
     Flat-rolled products                                  52.5                        59.7 
                                                  -------------               -------------
     Engineered products                                   41.4                        45.8 
                                                  -------------               -------------
Average realized third party sales price: (2)
     Alumina (per ton)                            $         172               $         201 
     Primary aluminum (per pound)                           .64                         .71 
Net sales:
     Bauxite and alumina:
          Third party (includes net sales of 
               bauxite)                           $        89.7               $        93.3
          Intersegment                                     23.0                        42.2 
                                                  -------------               -------------
               Total bauxite and alumina                  112.7                       135.5 
                                                  -------------               -------------
     Primary aluminum:
          Third party                                      89.1                       126.2 
          Intersegment                                     49.1                        66.8 
                                                  -------------               -------------
               Total primary aluminum                     138.2                       193.0 
                                                  -------------               -------------
     Flat-rolled products                                 148.3                       194.3 
     Engineered products                                  133.5                       162.6 
     Minority interests                                    18.8                        20.6 
     Eliminations                                         (72.1)                     (109.0)
                                                  -------------               -------------
               Total net sales                    $       479.4               $       597.0 
                                                  =============               =============
Operating income (loss)                           $       (31.5)              $        46.3 
                                                  =============               =============
Income (loss) before income taxes and minority
     interests                                    $       (57.9)              $        19.0 
                                                  =============               =============
Capital expenditures and investments in
     unconsolidated affiliates                    $        16.5               $        13.7 
                                                  =============               =============



<FN>

---------------
(1)  Shipments are expressed in thousands of metric tons.  A metric ton is
     equivalent to 2,204.6 pounds.
(2)  Average realized prices for the Kaiser's Flat-rolled products and
     Engineered products segments are not presented as such prices are
     subject to fluctuations due to changes in product mix.  Average
     realized third party sales prices for alumina and primary aluminum
     include the impact of hedging activities.

</TABLE>


          Kaiser's operating results are sensitive to changes in the prices
of alumina, primary aluminum and fabricated aluminum products, and also
depend to a significant degree on the volume and mix of all products sold
and on KACC's hedging strategies.  Primary aluminum prices have
historically been subject to significant cyclical fluctuations.  See Note 8
to the Consolidated Financial Statements for a discussion of KACC's hedging
activities.

          During 1998, the AMT Price for primary aluminum experienced a
steady decline during the year, beginning the year in the low $.70 to $.75
per pound range and ending the year in the low $.60 per pound range. 
During the first three months of 1999, the AMT Price for primary aluminum
was in the $.57 to $.59 per pound range most of the quarter, but increased
in March 1999 and ended the quarter at approximately $.62 per pound.  The
AMT Price for primary aluminum for the week ended April 23, 1999 was
approximately $.64 per pound.

     Net Sales

          Bauxite and alumina.  Third party net sales of alumina were down
2% for the quarter ended March 31, 1999, as compared to the same period
in 1998 as a 15% increase in third party shipments was more than offset by
a decline in average realized price.  The increase in 1999 third party
shipments (and offsetting decrease in 1999 intersegment shipments) resulted
from reduced shipments to Valco, due to the production curtailment more
fully discussed above and the fourth quarter strike-related curtailment of
three potlines at Kaiser's Washington smelters.  The average realized price
for third party alumina sales was down as the allocated net gains from
Kaiser's hedging activities only partially offset the decline in market
prices related to Kaiser's primary aluminum-linked customer sales
contracts.  In addition to being impacted by the reduced shipments to Valco
and the Washington smelters as discussed above, intersegment sales were
adversely affected by a substantial market-related decline in intersegment
average sales prices.

          Primary aluminum.  First quarter 1999 third party net sales of
primary aluminum were down 29% as compared to the comparable period in 1998
primarily as a result of a 22% reduction in shipments, caused by the 1998
potline curtailments at the Valco and Washington smelters.  Reduced average
realized third party sales prices between first quarter 1999 and
1998 (reflecting lower market prices offset, in part, by allocated net
gains from KACC's hedging activities) also adversely impacted third party
net sales.  Intersegment net sales were down approximately 27% between
first quarter 1999 and 1998. Intersegment shipments were down 9% from the
prior year comparable period and average realized prices dropped by 18%
reflecting lower market prices for primary aluminum.

          Flat-rolled products.  Net sales of flat-rolled products
decreased by 24% during first quarter 1999 as compared to 1998 as a result
of a 12% reduction in product shipments and 13% decline in average realized
prices.  The reduction in quarterly shipments reflects reduced aerospace
demand for heat treat products as compared to the first quarter of 1998 as
well as  customer deferrals of some can stock purchases into the second
quarter of 1999.  The decline in average realized prices reflects lower
market prices for primary aluminum as well as the price impact of the
changes in product mix discussed above.

          Engineered products.  Net sales of engineered products for the
1999 first quarter were down approximately 18% from the 1998 first quarter,
reflecting a 10% decrease in product shipments and a 9% decline in average
realized prices.  The reduction in shipments primarily resulted from
seasonality and softening demand primarily in aerospace market sectors. 
These factors were somewhat offset by strong demand for soft alloy
extrusions.  The change in average realized prices reflects lower market
prices for primary aluminum as well as the price impact of changes in
product mix.

     Operating Income

          Bauxite and alumina.  Operating income declined significantly
between the 1999 and 1998 first quarters due to the decline in market
related prices discussed above.  The impact of increased third party
shipments of alumina was substantially offset by a corresponding decline in
intersegment shipments.

          Primary aluminum.  Operating income in first quarter 1999 was
down significantly from first quarter 1998.  The primary reason for the
decline was the significant reduction in shipments and average realized
prices, discussed above.  However, first quarter 1999 results also reflect
the adverse impact of the Valco and Washington smelter potline
curtailments, the lack of any compensation from the VRA in 1999 related to
the Valco potline curtailments, and costs of approximately $7.1 million
associated with preparing and restarting potlines at the Valco and
Washington smelters.

          Flat-rolled products.  Operating income decreased significantly
in first quarter 1999 primarily as a result of the price, volume and
product mix factors discussed above.

          Engineered products.  Operating income declined significantly in
first quarter 1999 as compared to first quarter 1998 primarily as a result
of the price, volume, and product mix factors discussed above.

          Eliminations.  Eliminations of intersegment profit vary from
period to period depending on fluctuations in market prices as well as the
amount and timing of the affected segments' production and sales.

     FOREST PRODUCTS OPERATIONS

          The Company's forest products operations are conducted by MGI
through its principal operating subsidiaries.  MGI's business is highly
seasonal in that the forest products business generally experiences lower
first quarter sales due largely to the general decline in construction-
related activity during the winter months.  Accordingly, MGI's results for
any one quarter are not necessarily indicative of results to be expected
for the full year.  The following table presents selected operational and
financial information for the three months ended March 31, 1999 and 1998. 


<TABLE>
<CAPTION>


                                                        THREE MONTHS ENDED
                                                            MARCH 31,
                                                   --------------------------
                                                        1999          1998
                                                   ------------  ------------
                                                     (IN MILLIONS OF DOLLARS,
                                                       EXCEPT SHIPMENTS AND
                                                             PRICES)
<S>                                                <C>           <C>
Shipments:
     Lumber: (1)
          Redwood upper grades                              7.8          10.2 
          Redwood common grades                            38.7          53.9 
          Douglas-fir upper grades                          2.0           1.9 
          Douglas-fir common grades                        15.3           9.2 
          Other                                             2.5           2.5 
                                                   ------------  ------------
     Total lumber                                          66.3          77.7 
                                                   ============  ============
     Wood chips (2)                                        45.4          32.2 
                                                   ============  ============
Average sales price:
     Lumber: (3)
          Redwood upper grades                     $      1,418  $      1,491 
          Redwood common grades                             560           506 
          Douglas-fir upper grades                        1,272         1,269 
          Douglas-fir common grades                         377           352 
     Wood chips (4)                                          80            62 

Net sales:
     Lumber, net of discount                       $       41.6  $       48.5 
     Wood chips                                             3.6           2.0 
     Cogeneration power                                     0.6           0.6 
     Other                                                  0.9           0.8 
                                                   ------------  ------------
          Total net sales                          $       46.7  $       51.9 
                                                   ============  ============
Operating income (loss)                            $       (1.4) $       10.1 
                                                   ============  ============
Operating cash flow (5)                            $        3.5  $       15.7 
                                                   ============  ============
Income (loss) before income taxes and minority
     interests (6)                                 $      226.2  $       (4.2)
                                                   ============  ============
Capital expenditures                               $       12.4  $        2.8 
                                                   ============  ============ 


<FN>

---------------

(1)  Lumber shipments are expressed in millions of board feet.
(2)  Wood chip shipments are expressed in thousands of bone dry units of
     2,400 pounds.
(3)  Dollars per thousand board feet.
(4)  Dollars per bone dry unit.
(5)  Operating income before depletion and depreciation, also referred to
     as "EBITDA."
(6)  1999 results include a $239.8 million gain on the sale of the
     Headwaters Timberlands.

</TABLE>

          Net Sales
          Net sales for the 1999 first quarter decreased from the 1998
first quarter due primarily to lower shipments of upper and common grade
redwood lumber offset somewhat by higher shipments of Douglas-fir common
grade lumber.  The decrease in shipments of redwood lumber is largely due
to continuing reductions in the volume of logs available for the production
of lumber products.   The diminished supply of approved THPs, combined with
seasonal restrictions on logging operations, continues to affect log
supply.  See "--Trends" for further discussion of the factors affecting the
supply of approved THPs.

          Operating income (loss)
          The Forest Products segment had an operating loss for the quarter
ended March 31, 1999 as compared to operating income for  the comparable
1998 quarter, primarily due to decreases in net sales discussed above along
with higher cost of sales.  The increase in cost of sales was due to higher
logging costs and manufacturing  inefficiencies resulting from production
curtailments at the sawmills due to the lack of logs.

          Income (loss) before income taxes and minority interests
          Income before income taxes for the first quarter of 1999
increased from the comparable prior year period, principally due to the
gain on the sale of the Headwaters Timberlands of $239.8 million ($142.1
million net of deferred taxes or $18.17 per share), offset by the operating
loss discussed above.

     REAL ESTATE AND RACING OPERATIONS

          The Company, principally through its wholly owned subsidiaries,
invests in and develops residential and commercial real estate primarily in
Puerto Rico, Arizona and California.  The Company, through its
subsidiaries, also has majority ownership in SHRP, Ltd., a Texas limited
partnership, which owns and operates a Class 1 horse racing facility in
Houston, Texas.


<TABLE>
<CAPTION>

                                                           THREE MONTHS ENDED
                                                               MARCH 31,
                                                      --------------------------
                                                           1999          1998
                                                      ------------  ------------
                                                        (IN MILLIONS OF DOLLARS)
<S>                                                   <C>           <C>
Net sales:
     Real estate                                      $       10.6  $        8.5 
     SHRP, Ltd.                                                8.1           6.6 
                                                      ------------  ------------
          Total net sales                             $       18.7  $       15.1 
                                                      ============  ============

Operating income (loss):
     Real estate                                      $       (2.1) $       (2.5)
     SHRP, Ltd.                                                2.3           0.9 
                                                      ------------  ------------
          Total operating income (loss)               $        0.2  $       (1.6)
                                                      ============  ============

Income (loss) before income taxes and minority
     interests:
     Real estate                                      $       (0.5) $       (0.2)
     SHRP, Ltd.                                                2.0           0.2 
                                                      ------------  ------------
          Total income (loss) before income taxes and
               minority interests                     $        1.5  $          - 
                                                      ============  ============ 



</TABLE>

          Net sales
          Net sales increased for the three months ended March 31, 1999
from the same period in 1998 primarily due to higher revenues from the
Company's real estate development project in Puerto Rico and increases in
pari-mutuel wagering at the Sam Houston Race Park. 

          Operating income (loss)
          The real estate and racing segments had operating income for the
quarter ended March 31, 1999 as compared to an operating loss for the
comparable 1998 period due to higher net sales discussed above.

          Income (loss) before income taxes and minority interests
          The increase in income before income taxes and minority interests
for the three months ended March 31, 1999 compared to the same period in
1998 is primarily due to the operating income discussed above.

     OTHER ITEMS NOT DIRECTLY RELATED TO INDUSTRY SEGMENTS



<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED
                                                               MARCH 31,
                                                      --------------------------
                                                           1999          1998
                                                      ------------  ------------
                                                        (IN MILLIONS OF DOLLARS)
<S>                                                   <C>           <C>
Operating loss                                        $       (2.5) $       (3.5)
Loss before income taxes and minority interests               (5.3)         (5.8)


</TABLE>

          The operating losses represent corporate general and
administrative expenses that are not allocated to the Company's industry
segments.  The loss before income taxes and minority interests includes
operating losses, investment, interest and other income (expense) and
interest expense, including amortization of deferred financing costs, that
are not attributable to the Company's industry segments. 

          Minority interests
          Minority interests represent the minority stockholders' interest
in the Company's aluminum operations and minority partners' interest in
SHRP, Ltd.

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

     PARENT COMPANY AND MGHI

          This section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  See above for cautionary information with respect to
such forward-looking statements.

          The various credit instruments of Kaiser, MGHI, Pacific Lumber
and Scotia LLC contain various covenants which, among other things, limit
the ability of such entities to incur additional indebtedness and liens, to
engage in transactions with affiliates, to pay dividends and to make
investments.  As of March 31, 1999, no dividends could be paid by MGHI. 
Pursuant to the terms of the KACC Credit Agreement, Kaiser is prohibited
from paying any dividends with respect to its common stock.  As of March
31, 1999, the Company's other subsidiaries (principally real estate) had an
aggregate of nonrestricted cash and unused borrowing availability of
approximately $21.6 million which could have been paid to the Company.

          Kaiser has an effective shelf registration statement covering the
offering of up to 10 million shares of Kaiser common stock owned by the
Company.

          As of March 31, 1999, the Company (excluding its subsidiaries)
had cash and marketable securities of approximately $44.3 million.  The
Company believes that its existing resources, together with the cash
available from subsidiaries and financing sources, will be sufficient to
fund its working capital requirements for the next year.  With respect to
its long-term liquidity, the Company believes that its existing cash and
cash resources, together with the cash proceeds from the sale of assets and
distributions from its subsidiaries should be sufficient to meet its
working capital requirements.  However, there can be no assurance that the
Company's cash resources, together with the cash proceeds from the sale of
assets, distributions from its subsidiaries and other sources of financing,
will be sufficient for such purposes.  Any adverse outcome of the
litigation described in Note 7 to the Consolidated Financial Statements
could materially adversely affect the Company's consolidated financial
position, results of operations or liquidity. 

     ALUMINUM OPERATIONS

          At March 31, 1999, Kaiser had long-term debt of $962.7 million,
compared with $963.0 million at December 31, 1998.

          At March 31, 1999, $273.4 million (of which $73.4 million could
have been used for letters of credit) was available to KACC under the KACC
Credit Agreement and no amounts were outstanding.  Loans under the KACC
Credit Agreement bear interest at a spread (which varies based on the
results of a financial test) over either a base rate or LIBOR, at Kaiser's
option. 

          Kaiser has an effective shelf registration statement covering the
offering from time to time of up to $150.0 million of equity securities.

          Kaiser's capital expenditures during the three months ended March
31, 1999, were $16.5 million, and consisted primarily of expenditures to
purchase the remaining 45% interest in KLHP.   Total consolidated capital
expenditures (of which approximately 8% is expected to be funded by
Kaiser's minority partners in certain foreign joint ventures) are expected
to be between $70.0 million and $90.0  million per annum in each of 1999
through 2001.  The level of capital expenditures may be adjusted from time
to time depending on Kaiser's price outlook for primary aluminum and other
products, KACC's ability to assure future cash flows through hedging or
other means, Kaiser's financial position and other factors.

          Kaiser believes that its existing cash resources, together with
cash flow from operations and borrowings under the KACC Credit Agreement,
will be sufficient to satisfy its working capital and capital expenditure
requirements for the next year.  With respect to its long-term liquidity,
Kaiser believes that operating cash flow, together with its ability to
obtain both short- and long-term financing, should provide sufficient funds
to meet its long-term working capital and capital expenditure requirements.

     FOREST PRODUCTS OPERATIONS

          As of March 31, 1999, MGI and its subsidiaries had consolidated
long-term debt primarily related to the Timber Notes of $847.2 million (net
of current maturities) compared to $860.2 million at December 31, 1998.  As
of March 31, 1999, $26.4 million of borrowings was available under the
Pacific Lumber Credit Agreement, no borrowings were outstanding and letters
of credit outstanding amounted to $14.4 million.

           The Escrowed Funds, including accumulated interest, were $286.0
million as of March 31, 1999 and are to be made available as necessary to
support the Timber Notes.  The Escrowed Funds will be released by the
Escrow Agent only in accordance with the terms of the Escrow Agreement.

          MGI and its subsidiaries anticipate that existing cash, cash
equivalents, marketable securities and available sources of financing will
be sufficient to fund their working capital and capital expenditure
requirements for the next year.  With respect to their long-term liquidity,
dividends from Scotia LLC to Pacific Lumber will be limited for at least
the next two to three years, and therefore, absent any release to Pacific
Lumber of the Escrowed Funds, Pacific Lumber will not have adequate funds
to support all of its working capital and capital expenditure requirements,
and it will require contributions from MGI to meet any deficiencies. 
Although MGI and its subsidiaries (and in turn MGHI) believe that their
existing cash and cash equivalents should provide sufficient funds to meet
the working capital and capital expenditure requirements until such time as
Pacific Lumber has adequate cash flows from operations, dividends from
Scotia LLC and/or funds released from the Escrowed Funds, there can be no
assurance that this will be the case.  Furthermore, due to its highly
leveraged condition, MGI is more sensitive than less leveraged companies to
factors affecting its operations, including governmental regulation and
litigation affecting its timber harvesting practices (see Note 7 to the
Consolidated Financial Statements), increased competition from other lumber
producers or alternative building products and general economic conditions.

     REAL ESTATE AND RACING OPERATIONS

          As of March 31, 1999, the Company's real estate and other
subsidiaries had approximately $12.9 million available for use under a
$14.0 million revolving bank credit facility.  There were no outstanding
borrowings, and letters of credit outstanding amounted to $1.1 million. 
The Company believes that the existing cash and credit facilities of its
real estate and other subsidiaries are sufficient to fund the working
capital and capital expenditure requirements of such subsidiaries for the
next year.  With respect to the long-term liquidity of such subsidiaries,
the Company believes that their ability to generate cash from the sale of
their existing real estate, together with their ability to obtain
financing, should provide sufficient funds to meet their working
capital and capital expenditure requirements.

     TRENDS

          FOREST PRODUCTS OPERATIONS
          The Company's forest products operations are conducted by Pacific
Lumber and Britt.  Regulatory and environmental matters play a significant
role in Pacific Lumber's operations which are subject to a variety of
California and federal laws and regulations as well as the Final HCP, Final
SYP and 1999 TOL dealing with timber harvesting practices, threatened and
endangered species and habitat for such species, and air and water quality. 
Moreover, these laws and regulations are modified from time to time and are
subject to judicial and administrative interpretation.  Compliance with
such laws, regulations and judicial and administrative interpretations, and
related litigation have increased the cost of logging operations.  The
Company's forest products segment has also been adversely affected by a
lack of available logs as a result of a severely diminished supply of THPs. 
Prior to the consummation of the Headwaters Agreement on March 1, 1999, the
reduced number of approved THPs was attributable to several factors,
including a significantly reduced level of THPs submitted by Pacific Lumber
to the CDF during 1998 and during the first two months of 1999 due to (a)
the extensive amount of time devoted by Pacific Lumber's foresters,
wildlife and fisheries biologists and other personnel to (i) amending a
significant number of previously submitted THPs to incorporate various new
requirements which Pacific Lumber agreed to as part of the Pre-Permit
Agreement, (ii) preparing the Combined Plan and all the related data,
responding to comments on the Combined Plan, assessing and responding to
federal and state proposals and changes concerning the Combined Plan and
evaluating the Final Plans, (iii) responding to comments received by
Pacific Lumber from various federal and state governmental agencies with
respect to its filed THPs in light of the new and more stringent
requirements that Pacific Lumber agreed to observe pursuant to the Pre-
Permit Agreement, and (iv) responding to newly filed litigation involving
certain of Pacific Lumber's approved THPs and (b) implementation of a
provision contained in the Pre-Permit Agreement which requires, for the
first time, a licensed geologist to review virtually all of Pacific
Lumber's THPs prior to submission to the CDF. Pacific Lumber also
experienced an unexpected significantly slower rate of review and approval
with respect to its filed THPs due, in large part, to the issues that
emerged in applying the requirements embodied in the Pre-Permit Agreement
to Pacific Lumber's THPs, certain of which requirements imposed new
forestry practices that applied solely to Pacific Lumber's operations.

          With the consummation of the Headwaters Agreement, Pacific Lumber
has completed its work in connection with preparation of the Final Plans;
however, significant additional work will be required in connection with
its implementation.  The remainder of 1999 will be a transition year for
Pacific Lumber with respect to the filing and approval of its THPs. 
Certain of the THPs which were approved by the CDF prior to March 1, 1999
were grandfathered under the Implementation Agreement, and are harvestable
subject to the harvesting restrictions prescribed under the THPs and
satisfaction of certain agreed conditions.  The remaining THPs which were
in the process of being reviewed but were not yet approved by the CDF at
the time of the consummation of the Final Plans each require varying
degrees of revisions.  Pacific Lumber believes that the rate of submissions
of THPs and the review and approval of THPs during at least the second
quarter may be slower than Pacific Lumber has historically experienced as
Pacific Lumber, the CDF and other agencies develop procedures for
implementing the Final Plans.  Nevertheless, Pacific Lumber anticipates
that after a transition period, the implementation of the Final Plans will
streamline the process of preparing THPs and potentially shorten the time
to obtain approval of THPs.

          There can be no assurance that Pacific Lumber will not continue
to experience difficulties in submitting and receiving approvals of its
THPs similar to those it has been experiencing.  Furthermore, there can be
no assurance that certain pending regulatory and environmental matters or
future governmental regulations, legislation or judicial or administrative
decisions, or adverse weather conditions, would not have a material adverse
effect on the Company's financial position, results of operations or
liquidity.  See Note 7 to the Consolidated Financial Statements for further
information regarding regulatory and legal proceedings affecting the
Company's operations.

YEAR 2000

          The Company utilizes software and related technologies throughout
its business that will be affected by the date change to the year 2000. 
There may also be technology embedded in certain of the equipment owned or
used by the Company that is susceptible to the year 2000 date change as
well.  Each of the Company's segments have implemented programs to assess
the impact of the year 2000 date change.  Year 2000 progress and readiness
has also been the subject of the Company's normal, recurring internal audit
function.

          Kaiser has implemented a company-wide program to coordinate the
year 2000 efforts of its individual business units and to track their
progress.  The intent of the program is to make sure that critical items
are identified on a sufficiently timely basis to assure that the necessary
resources can be committed to address any material risk areas that could
prevent its systems and assets from being able to meet Kaiser's business
needs and objectives.   Each of Kaiser's business units has developed
year 2000 plans specifically tailored to their individual situations.  A
wide range of solutions are being implemented, including modifying existing
systems and, in limited cases where it is cost effective, purchasing new
systems.  Spending related to these projects, which began in 1997 and is
expected to continue through 1999, is currently estimated to be in the $10-
15 million range.  As of April 30, 1999, Kaiser estimates that
approximately $4-6 million of year 2000 expenditures are yet
to be incurred.  Such remaining amounts will be incurred over the balance
of 1999, primarily in the second and third quarters of the year.  System
modification costs are being expensed as incurred.  Costs associated with
new systems are being capitalized and will be amortized over the life of
the system.  Kaiser has established an internal goal of having all
necessary system changes in place and tested by mid-year 1999.
Substantially all facilities and systems are expected to meet this goal. 
However, a limited number of systems and pieces of equipment will not be
completely remedied and tested until sometime in the third quarter of the
year.  Kaiser plans to commit the necessary resources for all remediation
efforts.

          In addition to addressing Kaiser's internal systems, its company-
wide program involves identification of key suppliers, customers, and other
third party relationships that could be impacted by year 2000 issues.  A
general survey has been conducted of Kaiser's supplier base.  Direct
contact has been made, or is in progress, with parties which are deemed to
be critical including financial institutions, power suppliers and
customers, with which Kaiser has a material relationship.

          Each business unit, including the corporate group, is developing
a contingency plan covering the steps that would be taken if a year 2000
problem were to occur despite Kaiser's best efforts to identify and remedy
all critical at-risk items.  Each contingency plan will address, among
other things, matters such as alternative suppliers for critical inputs,
incremental standby labor requirements at the millennium to address any
problems as they occur, and backup processing capabilities for critical
equipment or processes.  The goal of the contingency plans will be to
minimize any business interruptions and the associated financial
implications.

          MGI has established a team to address the potential impacts of
the year 2000 on each of its critical business functions.  The team has
completed its assessment of MGI's critical information technology and
embedded technology, including its geographic information system and the
equipment and systems used in operating its sawmills and cogeneration
plant, and is now in the process of making the required modifications for
these systems to be year 2000 compliant.  The modification costs are
expected to be immaterial, costing less than $100,000 and, except for MGI's
cogeneration plant, are expected to be completed by mid-year 1999.  In most
cases testing of the modifications will also be completed by such time.
Modifications and testing of the cogeneration plant are expected to be
completed by the end of the third quarter of 1999.  System modification
costs are being expensed as incurred.  Costs associated with new systems
are being capitalized and will be amortized over the life of the product. 

          In addition to addressing MGI's internal systems, the team has
identified key vendors that could be impacted by year 2000 issues, and
surveys have been conducted regarding their compliance efforts.  Management
is evaluating the responses to the surveys and making direct contact with
parties which are deemed to be critical.  These inquiries are being made by
MGI's own staff, and the costs associated with this program are expected to
be minimal.

          The Company's real estate segment has completed the process of
evaluating its information technology systems, and has substantially
completed the modifications to make these systems compliant at the end of
1998.  The costs were not material.  Other assets with embedded technology
are not significant to the business operations of this segment.  Several
financial institutions provide various services to this segment which are
critical to its business operations, and inquiries as to the status of
their year 2000 compliance evaluations are in the process of being
conducted.

          SHRP, Ltd. is currently in the process of assessing both its
information technology systems and its embedded technology in order to
determine that they are, or will be, year 2000 compliant.  Management has
already determined that its financial data processing hardware and software
are compliant and is presently working with certain key third parties and
support groups of its embedded technology to ensure that they are taking
appropriate measures to assure compliance.  SHRP, Ltd. believes that the
total cost to make these systems year 2000 compliant will not exceed
$100,000.  The most significant area still being evaluated pertains to
certain key third parties, in particular, the firm that provides its
totalizator services (computerized wagering system) to it and others in the
horse racing industry.  These data processing services are required in
order for SHRP, Ltd. to conduct pari-mutuel wagering in Texas. Management,
as well as the thoroughbred racing industry's association, has received
assurances that such systems will be compliant by the second quarter of
1999.  However, management is evaluating other third party providers of
these and other services and equipment in the event that any such vendors
can not provide assurance of year 2000 compatibility in sufficient time to
effect a change. 

          While the Company believes that its programs are sufficient to
identify the critical issues and associated costs necessary to address
possible year 2000 problems in a timely manner, there can be no assurance
that the program, or underlying steps implemented, will be successful in
resolving all such issues prior to the year 2000.  If the steps taken by
the Company (or critical third parties) are not made in a timely manner, or
are not successful in identifying and remedying all significant year 2000
issues, business interruptions or delays could occur and could have a
material adverse impact on the Company's results and financial condition. 
However, based on the information the Company has gathered to date and its
expectations of its ability to remedy problems encountered, the Company
believes that it will not experience significant business interruptions
that would have a material impact on its results or financial condition.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          See Part I. Item 7a. "Quantitative and Qualitative Disclosures
About Market Risk" in the Form 10-K.

                        PART II.  OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS

          Reference is made to Item 3 of the Form 10-K for information
concerning material legal proceedings with respect to the Company.  The
following material developments have occurred with respect to such legal
proceedings subsequent to the filing of the Form 10-K.

          MAXXAM INC. LITIGATION

          With respect to the Martel action described in the Form 10-K, on
April 14, 1999, the Court awarded approximately $110,000 in attorneys' fees
and expenses to the defendants.  

          PACIFIC LUMBER LITIGATION 

          On March 31, 1999, the EPIC-SYP/Permits lawsuit was filed against
Pacific Lumber, Scotia LLC, Salmon Creek and others in the Superior Court
of Sacramento County.  This action alleges, among other things, that the
CDF and CDFG violated the CEQA and the CESA with respect to the Final SYP
and the Permits issued by California.  The plaintiffs seek, among other
things, injunctive relief to set aside the CDF's and CDFG's decisions
approving the Final SYP and the Permits issued by California.  The Company
believes that appropriate procedures were followed throughout the
public review and approval process concerning the Final Plans, and the
Company is working with the relevant state and federal agencies to
defend this lawsuit.  Although uncertainties are inherent in the final
outcome of the EPIC-SYP/Permits lawsuit, the Company believes that the
resolution of this matter should not result in a material adverse effect
on its financial condition or results of operations or the ability to
harvest timber.

          On March 31, 1999, the USWA lawsuit was also filed against
Pacific Lumber, Scotia LLC and Salmon Creek in the California Superior
Court of Sacramento County.  This action alleges, among other things,
violations of the Forest Practice Act in connection with the CDF's approval
of the Final SYP.  The plaintiffs seek to prohibit the CDF from approving
any THPs relying on the Final SYP.  The Company believes that
appropriate procedures were followed throughout the public review and
approval process concerning the Final Plans, and the Company is working
with the relevant state and federal agencies to defend this lawsuit.
Although uncertainties are inherent in the final outcome of the USWA
lawsuit, the Company believes that the resolution of this matter should
not result in a material adverse effect on its financial condition or
results of operations or the ability to harvest timber.

          With respect to the Hunsaker action described in the Form 10-K,
on March 30, 1999, the Court dismissed the lawsuit with prejudice and
ordered the plaintiffs to pay the defendants' costs with respect to the
lawsuit.  On April 30, 1999, the plaintiffs filed a notice of appeal.

          With respect to the EPIC lawsuit described in the Form 10-K, on
May 5, 1999, the Court dissolved the preliminary injunction, granted the
defendants' motion for summary judgment and dismissed the case as moot.


ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

A.        EXHIBITS:


          4.1  Fourth Supplemental Indenture, dated as of March 31, 1999,
               to the Indenture, dated as of February 1, 1993, among KACC,
               as Issuer, and certain of its subsidiaries (as guarantors)
               and State Street Bank and Trust Company, as Trustee,
               regarding KACC's 12-3/4% Senior Subordinated Notes due 2003 
               (incorporated herein by reference to Exhibit 4.1 to Kaiser's
               Quarterly Report on Form 10-Q for the quarter ended March
               31, 1999; File No. 1-9447; the "Kaiser March 1999 Form 10-
               Q")


          4.2  Third Supplemental Indenture, dated as of March 31, 1999, to
               the Indenture, dated as of February 17, 1994, among KACC as
               Issuer, and certain of its subsidiaries (as guarantors), and
               First Trust National Association ("First Trust"), as
               Trustee, regarding KACC's 9-7/8% Senior Notes due 2002 
               (incorporated herein by reference to Exhibit 4.2 to the
               Kaiser March 1999 Form 10-Q)

          4.3  Second Supplemental Indenture, dated as of March 31, 1999,
               to the Indenture, dated as of October 23, 1996, among KACC
               as Issuer, and certain of its subsidiaries (as guarantors), 
               and First Trust, as Trustee, regarding KACC's 10-7/8% Series
               B Senior Notes due 2006 (incorporated herein by reference to
               Exhibit 4.3 to the Kaiser March 1999 Form 10-Q)

          4.4  Second Supplemental Indenture, dated as of March 31, 1999,
               to the Indenture, dated as of December 23, 1996, among KACC
               as Issuer, and certain of its subsidiaries (as guarantors),
               and First Trust, as Trustee, regarding KACC's 10-7/8% Series
               D Senior Notes due 2006 (incorporated herein by reference to
               Exhibit 4.4 to the Kaiser March 1999 Form 10-Q)

        *27.1  Financial Data Schedule for the quarter ended March 31, 1999

*Included with this filing

B.        REPORTS ON FORM 8-K:

          On March 24, 1999, the Company filed a current report on Form 8-K
(under Item 5) concerning the filing of a Prospectus Supplement to the
Prospectus dated December 30, 1998 of Scotia LLC.  

                                 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, who have signed this report
on behalf of the Registrant and as the principal financial and accounting
officers of the Registrant, respectively.


                                           MAXXAM INC.

Date:  May 7, 1999              By:    /S/ PAUL N. SCHWARTZ       
                                         Paul N. Schwartz
                                    President, Chief Financial
                                       Officer and Director
                                   (Principal Financial Officer)


Date:  May 7, 1999              By:  /S/ ELIZABETH D. BRUMLEY
                                       Elizabeth D. Brumley
                                            Controller
                                  (Principal Accounting Officer)


                                                                 APPENDIX A


                         GLOSSARY OF DEFINED TERMS


AKW:  AKW L.P., an aluminum wheels joint venture

AMT Price:  Average Midwest United States transaction price for primary
     aluminum

Britt:  Britt Lumber Co., Inc., an indirect wholly owned subsidiary of MGI

California Agreement:  An agreement between the Pacific Lumber Parties and
     California regarding the enforcement of the California bill which
     authorized state funds for the purchase of the Headwaters Timberlands
     while imposing certain restrictions on the remaining timberlands held
      by the Pacific Lumber Parties

CDF:  California Department of Forestry and Fire Protection

CDFG: California Department of Fish and Game

CERCLA:  Comprehensive Environmental Response, Compensation and Liability
     Act of 1980, as amended by the Superfund Amendments and
     Reauthorization Act of 1986

CEQA: California Environmental Quality Act

CESA:  California Endangered Species Act

Class A Preferred Stock:  Class A $.05 Non-Cumulative Participating
     Convertible Preferred Stock of the Company

Combined Plan:  The Combined SYP and Multi-Species HCP released by
     Pacific Lumber and Scotia LLC for public review and comment in
     July 1998

Common Stock:  $0.50 par value common stock of the Company

Company:  MAXXAM Inc.

EPA:  Environmental Protection Agency

EPIC:  Environmental Protection Information Center, Inc.

EPIC lawsuit:  An action entitled Environmental Protection Information
     Center, Inc., Sierra Club v. The Pacific Lumber Company, Scotia Pacific
     Holding Company and Salmon Creek Corporation (No. C 98-3129) filed
     August 12, 1998 in the United States District Court for the Northern
     District of California

EPIC Notice Letter:  A notice received by the Company on or about January
     29, 1999 from EPIC and the Sierra Club of their intent to sue Pacific
     Lumber and several federal agencies under the ESA

EPIC-SYP/Permits lawsuit: An action entitled Environmental Protection
     Information Association, Sierra Club v. California Department of
     Forestry and Fire Protection, California Department of Fish and Game,
     The Pacific Lumber Company, Scotia Pacific Company LLC, Salmon Creek
     Corporation, et al. (No. 99CS00639) filed March 31, 1999 in the
     Superior Court of Sacramento County

ESA:  The federal Endangered Species Act

Escrow Agent:  The agent holding the Escrowed Funds under the Escrow
     Agreement

Escrow Agreement:  The agreement covering the Escrowed Funds

Escrowed Funds:  Proceeds of $285.0 million received by Salmon Creek in
     connection with the sale of the Headwaters Timberlands plus accrued
     interest which have been deposited into an escrow account pursuant to
     the Escrow Agreement as necessary to support the Timber Notes

FDIC:  Federal Deposit Insurance Corporation

FDIC action:  An action filed by the FDIC on August 2, 1995 entitled
     Federal Deposit Insurance Corporation, as manager of the FSLIC
     Resolution Fund v. Charles E. Hurwitz (No. H-95-3956) in the U.S.
     District Court for the Southern District of Texas

Federated:  Federated Development Company, a principal stockholder of the
     Company

Final HCP:  The Multi-Species HCP approved on March 1, 1999 in connection
     with the consummation of the Headwaters Agreement

Final Plans: The Final HCP and the Final SYP

Final SYP:  The SYP approved on March 1, 1999 in connection with the
     consummation of the Headwaters Agreement

Forest Practice Act: The California Forest Practice Act

Form 10-K:  The Company's Annual Report on Form 10-K filed with the
     Securities and Exchange Commission for the fiscal year ended December
     31, 1998

Grizzly Creek Agreement:  The agreement entered into by Pacific Lumber with
     California for the future sale of a portion of the Grizzly Creek grove

Headwaters Agreement:  The September 28, 1996 agreement between the Pacific
     Lumber Parties, the United States and California which provided the
     framework for the acquisition by the United States and California of
     the Headwaters Timberlands

Headwaters Timberlands:  Approximately 5,600 acres of Pacific Lumber
     timberlands consisting of two forest groves commonly referred to as
     the Headwaters Forest and the Elk Head Springs Forest which were sold
     to the United States and California on March 1, 1999

Hunsaker action: An action entitled William Hunsaker, et al. v. Charles E.
     Hurwitz, The Pacific Lumber Company, MAXXAM Group Inc., MXM Corp.,
     Federated Development Company and Does (1-50) (No. C98-4515) filed
     November 24, 1998 in the United States District Court for the Northern
     District of California

Implementation Agreement:  The Implementation Agreement with Regard to
     Habitat Conservation Plan agreed to in connection with the
     consummation of the Headwaters Agreement

KACC:  Kaiser Aluminum & Chemical Corporation, Kaiser's principal operating
     subsidiary

KACC Credit Agreement:  The revolving credit facility with KACC and a bank
     under which KACC is able to borrow by means of revolving credit
     advances and letters of credit (up to $125.0 million) in an aggregate
     amount equal to the lesser of $325.0 million or a borrowing base
     relating to eligible accounts receivable plus eligible inventory

Kaiser:  Kaiser Aluminum Corporation, a subsidiary of the Company engaged
     in aluminum operations

KLHP:  Kaiser LaRoche Hydrate Partners

LTSY:  Long-term sustained yield

Martel action: An action entitled U.S., ex rel., Martel v. Hurwitz, et al.
     (No. C 95-0322) filed in January 1995 in the United States District
     Court for the Northern District of California

MPC: MAXXAM Property Company, a wholly-owned subsidiary of the Company

MGHI:  MAXXAM Group Holdings Inc., a wholly owned subsidiary of the Company

MGI:  MAXXAM Group Inc., a wholly owned subsidiary of MGHI

Multi-Species HCP:  A habitat conservation plan covering multiple species

Notice:  A Notice of Charges filed on December 26, 1995 by the OTS against
     the Company and others with respect to the failure of USAT

OTS: The United States Department of Treasury's Office of Thrift
     Supervision

Owl Creek Agreement:  The agreement entered into by Scotia LLC with
     California regarding the future sale of the Owl Creek grove

Owl Creek Grove: A grove of approximately 900 acres of primarily old growth
     timber owned by the Company

Pacific Lumber:  The Pacific Lumber Company, an indirect, wholly-owned
     subsidiary of MGI

Pacific Lumber Credit Agreement:  The revolving credit agreement between
     Pacific Lumber and a bank which provides for borrowings of up to $60.0
     million, all of which may be used for revolving borrowings, $20.0
     million of which may be used for standby letters of credit and $30.0
     million of which may be used for timberland acquisitions.

Pacific Lumber Parties:  Pacific Lumber, including its subsidiaries and
     affiliates, and the Company

Permits:  The incidental take permits issued by the United States and
     California pursuant to the Final HCP

Prefunding Account:  Restricted cash held in an account by the trustee
     under the indenture governing the Timber Notes to enable Scotia LLC to
     acquire timberlands

Pre-Permit Agreement:  The February 27, 1998 Pre-Permit Application
     Agreement in Principle entered into by Pacific Lumber, the Company and
     various government agencies regarding certain understandings that they
     had reached regarding the Multi-Species HCP, the Permits and the SYP

Salmon Creek:  Salmon Creek Corporation, a wholly owned subsidiary of
     Pacific Lumber

Scotia LLC:  Scotia Pacific Company LLC, a limited liability company wholly
     owned by Pacific Lumber

Scotia Pacific:  Scotia Pacific Holding Company, a wholly owned subsidiary
     of Pacific Lumber, which was merged into Scotia LLC on July 20, 1998

SFAS No. 130:  Statement of Financial Accounting Standards No. 130,
     "Reporting Comprehensive Income"

SFAS No. 133:  Statement of Financial Standard No. 133, "Accounting for
     Derivative Instruments and Hedging Activities"

SHRP, Ltd.:  Sam Houston Race Park, Ltd., a 98.2%-owned subsidiary of the
     Company

SYP:  Sustained yield plan establishing long-term sustained yield harvest
     levels for a company's timberlands

THP:  Timber harvesting plan required to be filed with and approved by the
     CDF prior to the harvesting of timber

Timber Notes: Scotia LLC's $867.2 million original aggregate principal
     amount of 6.55% Series B Class A-1 Timber Collateralized Notes, 7.11%
     Series B Class A-2 Timber Collateralized Notes and 7.71% Series B
     Class A-3 Timber Collateralized Notes due July 20, 2028

TMDLs: Total maximum daily load limits

TOL: Timber operator's license allowing the holder to conduct timber
     harvesting operations

UFG:  United Financial Group, Inc.

ULPs: Unfair labor practices

USAT:  United Savings Association of Texas

USWA: United Steelworkers of America

USWA lawsuit: An action entitled United Steelworkers of America, AFL-CIO,
     CLC, and Donald Kegley v. California Department of Forestry and Fire
     Protection, The Pacific Lumber Company, Scotia Pacific Company LLC and
     Salmon Creek Corporation (No. 99CS00626) filed on March 31, 1999 in
     the Superior Court of Sacramento County

Valco:  Volta Aluminium Company Limited, Kaiser's 90%-owned smelter
     facility in Ghana

VRA:  Volta River Authority, an electric power supplier to Valco