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 JUNE 30, 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 August 11, 1999: 7,000,863


                             TABLE OF CONTENTS



PART I. - FINANCIAL INFORMATION

     Item 1.   Financial Statements:
          Consolidated Balance Sheet at June 30, 1999 and
               December 31, 1998
          Consolidated Statement of Operations for the three
               and six months ended June 30, 1999 and 1998
          Consolidated Statement of Cash Flows for the six months
               ended June 30, 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 4.   Submission of Matters to a Vote of Security Holders
     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>
                                                    JUNE 30,    DECEMBER 31,
                                                      1999          1998
                                                 ------------  ------------
                                                  (UNAUDITED)
                     ASSETS
<S>                                              <C>           <C>
Current assets:
     Cash and cash equivalents                   $      196.2  $      294.2
     Marketable securities                               60.3          19.4
     Receivables:
          Trade, net of allowance for doubtful
               accounts of $6.2 and $6.4,
               respectively                             183.9         184.5
          Other                                         110.8         122.6
     Inventories                                        553.7         587.5
     Prepaid expenses and other current assets          167.4         152.4
                                                 ------------  ------------
               Total current assets                   1,272.3       1,360.6
Property, plant and equipment, net of
     accumulated depreciation of $963.0 and
     $921.5, respectively                             1,254.8       1,278.9
Timber and timberlands, net of accumulated
     depletion of $177.0 and $178.4,
     respectively                                       257.2         302.3
Investments in and advances to unconsolidated
     affiliates                                         117.3         146.5
Deferred income taxes                                   518.1         555.8
Restricted cash                                         294.0          17.5
Long-term receivables and other assets                  552.5         413.6
                                                 ------------  ------------
                                                 $    4,266.2  $    4,075.2
                                                 ============  ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
     Accounts payable                            $      158.1  $      182.9
     Accrued interest                                    72.2          72.4
     Accrued compensation and related benefits          121.9         133.7
     Other accrued liabilities                          199.4         180.6
     Payable to affiliates                               79.7          77.1
     Short-term borrowings and current
          maturities of long-term debt                   44.2          37.0
                                                 ------------  ------------
               Total current liabilities                675.5         683.7
Long-term debt, less current maturities               1,957.2       1,971.7
Accrued postretirement medical benefits                 697.9         704.5
Other noncurrent liabilities                            756.6         604.8
                                                 ------------  ------------
               Total liabilities                      4,087.2       3,964.7
                                                 ------------  ------------
Commitments and contingencies
Minority interests                                      141.8         167.3
Stockholders' equity (deficit):
     Preferred stock, $.50 par value; 12,500,000
          shares authorized; Class A $.05
          Non-Cumulative Participating
          Convertible Preferred Stock;
          shares issued:  669,435                         0.3           0.3
     Common stock, $.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                                (81.7)       (175.7)
     Treasury stock, at cost (shares held:
          preferred - 845; common: 3,062,496)          (109.2)       (109.2)
                                                 ------------  ------------
               Total stockholders' equity
                    (deficit)                            37.2         (56.8)
                                                 ------------  ------------
                                                 $    4,266.2  $    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           SIX MONTHS ENDED
                                                JUNE 30,                    JUNE 30,
                                      --------------------------  --------------------------
                                           1999          1998          1999          1998
                                      ------------  ------------  ------------  ------------
                                                            (UNAUDITED)
<S>                                   <C>           <C>           <C>           <C>
Net sales:
     Aluminum operations              $      525.0  $      614.8  $    1,004.4  $    1,211.8
     Forest products operations               41.4          63.5          88.1         115.4
     Real estate and racing
          operations                          22.4          21.3          41.1          36.4
                                      ------------  ------------  ------------  ------------
                                             588.8         699.6       1,133.6       1,363.6
                                      ------------  ------------  ------------  ------------

Costs and expenses:
     Cost of sales and operations:
          Aluminum operations                473.9         503.5         933.8       1,000.6
          Forest products operations          36.2          39.5          76.0          72.6
          Real estate and racing
               operations                     13.6          11.7          24.5          21.4
     Selling, general and
          administrative expenses             39.0          43.9          78.4          86.1
     Depreciation, depletion and
          amortization                        28.7          30.0          58.7          60.6
                                      ------------  ------------  ------------  ------------
                                             591.4         628.6       1,171.4       1,241.3
                                      ------------  ------------  ------------  ------------

Operating income (loss)                       (2.6)         71.0         (37.8)        122.3

Other income (expense):
     Gain on sale of Headwaters
          Timberlands                            -             -         239.8             -
     Investment, interest and other
          income                              15.2          10.2          24.5          21.8
     Interest expense                        (49.2)        (52.5)        (98.6)       (106.4)
                                      ------------  ------------  ------------  ------------
Income (loss) before income taxes and
     minority interests                      (36.6)         28.7         127.9          37.7
Credit (provision) for income taxes           11.6         (10.2)        (55.8)        (13.4)
Minority interests                             6.9          (6.1)         21.9         (10.0)
                                      ------------  ------------  ------------  ------------
Net income (loss)                     $      (18.1) $       12.4  $       94.0  $       14.3
                                      ============  ============  ============  ============

Earnings (loss) per share:
     Basic                            $      (2.59) $       1.76  $      13.42  $       2.04
                                      ============  ============  ============  ============

     Diluted                          $      (2.59) $       1.57  $      12.01  $       1.83
                                      ============  ============  ============  ============


<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>

                                                            SIX MONTHS ENDED
                                                                JUNE 30,
                                                      --------------------------
                                                           1999          1998
                                                      ------------  ------------
                                                              (UNAUDITED)
<S>                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                       $       94.0  $       14.3
     Adjustments to reconcile net income to net cash
          provided by (used for) operating
          activities:
          Depreciation, depletion and amortization            58.7          60.6
          Gain on sale of Headwaters Timberlands            (239.8)            -
          Net gain on other asset dispositions               (51.4)         (6.3)
          Net sales (purchases) of marketable
               securities                                    (31.3)         56.1
          Net gain on marketable securities                   (9.6)         (6.9)
          Minority interests                                 (21.9)         10.0
          Amortization of deferred financing costs
               and discounts on long-term debt                 5.1          12.1
          Equity in (earnings) loss of unconsolidated
               affiliates, net of dividends received          (3.4)          0.2
          Increase (decrease) in cash resulting from
               changes in:
               Receivables                                    17.7          54.4
               Inventories                                    31.4          66.3
               Prepaid expenses and other assets             (21.7)         12.9
               Accounts payable                              (25.1)        (17.9)
               Accrued and deferred income taxes              48.0           3.3
               Payable to affiliates and other
                    accrued liabilities                        3.8         (36.7)
               Long-term assets                              (32.1)         (9.3)
               Long-term liabilities                          40.4          (9.1)
          Other                                                3.1           2.1
                                                      ------------  ------------
               Net cash provided by (used for)
                    operating activities                    (134.1)        206.1
                                                      ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Net proceeds from sale of Headwaters Timberlands        298.4             -
     Net proceeds from other dispositions of property
          and investments                                     74.3          14.8
     Capital expenditures                                    (49.2)        (53.5)
     Restricted cash withdrawals used to acquire
          timberlands                                         12.9             -
     Investment in subsidiaries and joint ventures               -          (1.6)
     Other                                                    (3.1)          3.1
                                                      ------------  ------------
          Net cash provided by (used for) investing
               activities                                    333.3         (37.2)
                                                      ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of long-term debt                  1.0           4.8
     Redemptions, repurchases and principal payments
          on long-term debt                                   (8.7)        (19.0)
     Redemption of preference stock                           (1.4)         (8.5)
     Restricted cash deposits                               (289.4)            -
     Treasury stock repurchases                                  -         (35.1)
     Other                                                     1.3           1.6
                                                      ------------  ------------
          Net cash used for financing activities            (297.2)        (56.2)
                                                      ------------  ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (98.0)        112.7
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             294.2         164.6
                                                      ------------  ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD            $      196.2  $      277.3
                                                      ============  ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Interest paid, net of capitalized interest       $       93.6  $       94.9
     Income taxes paid                                         8.9           9.0

<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 June 30, 1999, the
consolidated results of operations for the three and six months ended June
30, 1999 and 1998 and consolidated cash flows for the six months ended June
30, 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 and six month periods ended
June 30, 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.  However, Kaiser has continued to accrue certain
benefits for the USWA members during the strike and subsequent lock-out.
For purposes of computing the benefit-related costs and liabilities to be
reflected in the accompanying consolidated financial statements, Kaiser
based its accruals on the terms of the previously existing (expired) USWA
contract.  Any differences between any amounts accrued and any 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
          In June 1998, the FASB issued SFAS No. 133 which requires
companies to recognize all derivative instruments as assets or liabilities
in the balance sheet and to measure those instruments at fair value.  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 hedges relate.  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 transactions to which the hedges relate.  Currently, the
dollar amount of the Company's comprehensive income adjustments is not
significant so there is no 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 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.

          SFAS No. 133 initially required adoption on or before January 1,
2000.  However, in June 1999, the FASB issued SFAS No. 137 which delayed
the required implementation date of SFAS No. 133 to no later than January
1, 2001.  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 700 acres being owned by Scotia LLC (Pacific Lumber owned 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 Pacific Lumber contributed to Scotia
LLC in June 1999.  Of these proceeds, $285.0 million was 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 June 30, 1999, the Escrowed Funds were $288.2
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 into 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, no later than 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, no later than
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 Grizzly Creek 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 were already included in the Company's
consolidated financial statements.

          Disposition of Interest in AKW
          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 for $70.4 million.  The sale resulted in the Company
recognizing a net pre-tax gain of $50.5 million in the second quarter of
1999.  The Company's equity in income of AKW for the quarter ended March
31, 1999 was $2.5 million.  The Company's equity in income of AKW for the
quarter and six-month periods ended June 30, 1998 was $2.3 million and $3.4
million, respectively.

3.        INVENTORIES

          Inventories consist of the following (in millions):


<TABLE>
<CAPTION>

                                                    JUNE 30,    DECEMBER 31,
                                                      1999          1998
                                                 ------------  ------------
<S>                                              <C>           <C>
Aluminum Operations:
     Finished fabricated aluminum products       $      118.2  $      112.4
     Primary aluminum and work in process               171.6         205.6
     Bauxite and alumina                                118.9         109.5
     Operating supplies and repair and
          maintenance parts                             116.0         116.0
                                                 ------------  ------------
                                                        524.7         543.5
                                                 ------------  ------------
Forest Products Operations:
     Lumber                                              24.2          36.0
     Logs                                                 4.8           8.0
                                                 ------------  ------------
                                                         29.0          44.0
                                                 ------------  ------------
                                                 $      553.7  $      587.5
                                                 ============  ============


</TABLE>

4.        RESTRICTED CASH

          Cash and cash equivalents include restricted cash held as
security for short positions in marketable securities and for debt service
payments on the Timber Notes of $42.9 million and $96.1 million at June 30,
1999 and December 31, 1998, respectively.

          Long-term restricted cash at June 30, 1999 primarily consists of
the Escrowed Funds and funds held in the Prefunding Account.  Long-term
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>

                                                     JUNE 30,    DECEMBER 31,
                                                       1999          1998
                                                  ------------  ------------
<S>                                               <C>           <C>
12% MGHI Senior Secured Notes due August 1, 2003  $      130.0  $      130.0
Pacific Lumber Credit Agreement                              -             -
6.55% Scotia LLC Class A-1 Timber Collateralized
     Notes due July 20, 2028                             155.4         160.7
7.11% Scotia LLC Class A-2 Timber Collateralized
     Notes due July 20, 2028                             243.2         243.2
7.71% Scotia LLC Class A-3 Timber Collateralized
     Notes due July 20, 2028                             463.3         463.3
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                                     224.5         224.4
Alpart CARIFA Loans                                       60.0          60.0
12-3/4% KACC Senior Subordinated Notes due
     February 1, 2003                                    400.0         400.0
Other aluminum operations debt                            52.5          52.9
Other notes and contracts, primarily secured by
     receivables, buildings,
     real estate and equipment                            28.3          30.0
                                                  ------------  ------------
                                                       1,982.9       1,990.2
          Less: current maturities                       (25.7)        (18.5)
                                                  ------------  ------------
                                                   $   1,957.2  $    1,971.7
                                                  ============  ============


</TABLE>

6.        PER SHARE INFORMATION

          Basic earnings (loss) per share is calculated by dividing net
income (loss) 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 year from the
date of issuance or repurchase.  The weighted average common shares
outstanding were 7,000,863 shares and 7,000,597 shares for the three and
six months ended June 30, 1999 and 1998, respectively.

          Diluted earnings (loss) 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 7,000,863 shares
and 7,829,119 shares for the three months ended June 30, 1999 and 1998,
respectively, and 7,824,871 shares and 7,813,317 shares for the six months
ended June 30, 1999 and 1998, respectively.  The impact of outstanding
convertible stock and stock options of 831,309 was excluded from the
weighted average share calculation for the three months ended June 30, 1999
as its effect would have been antidilutive.

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 June 30, 1999, the balance of such accruals, which are
primarily included in other noncurrent liabilities, was $50.1 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 actions 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 $30.0 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 assurance 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 sold for at least 20
years.  At June 30, 1999, the number of claims pending was approximately
94,700, as 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 and six-month periods ended June 30,
1999, approximately 7,000 and 16,300 of such claims were received and 3,600
and 8,000 of such claims were settled or dismissed.  However, the foregoing
claim and settlement figures as of and for the quarter and six-month
periods ended June 30, 1999 do not reflect the fact that as of June 30,
1999, KACC reached agreements under which it will settle approximately
27,000 of the pending asbestos-related claims over an extended period.

          Kaiser maintains a liability for estimated asbestos-related costs
for claims filed to date and an estimate of claims expected to be filed
over a 10 year period (i.e., through 2009).  Kaiser's estimate is based on
Kaiser's view, at each balance sheet date, of the current and anticipated
number of asbestos-related claims, the 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.  However, there are inherent uncertainties involved in estimating
asbestos-related costs and Kaiser's actual costs could exceed Kaiser's
estimates due to changes in facts and circumstances after the date of each
estimate. Further, while Kaiser does not presently believe there is a
reasonable basis for estimating asbestos-related costs beyond 2009 and,
accordingly, no accrual has been recorded for any costs which may be
incurred beyond 2009, there is a reasonable possibility that such costs may
continue beyond 2009, and that such costs could be substantial.  As of June
30, 1999, an estimated asbestos-related cost accrual of $337.5 million,
before consideration of insurance recoveries, has been reflected in the
accompanying financial statements primarily in other noncurrent
liabilities.  Kaiser estimates that annual future cash payments for
asbestos-related costs will be approximately $37.0 million to $54.0 million
for each of the years 1999 through 2003, and an aggregate of approximately
$123.0 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 the 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 $272.5 million, determined on the same
basis as the asbestos-related cost accrual, is recorded primarily in long-
term receivables and other assets at June 30, 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.  In the second quarter
of 1999, this process resulted in the Company reflecting a $38.0 million
charge (included in other income (expense)) for asbestos-related claims,
net of expected insurance recoveries, based on recent cost and other trends
experienced by KACC and other companies.  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.  However, as Kaiser's estimates are periodically
re-evaluated, additional charges may be necessary and such charges could be
material to the results of the period in which they are recorded.

          Labor Matters
          In connection with the USWA strike and subsequent lock-out by
KACC, certain allegations of ULP's were filed with the NLRB by the USWA.
KACC responded to all such allegations and believed that they were without
merit.  In July 1999, all material charges were dismissed by the NLRB's
Regional Director.  The USWA has announced its intention to appeal the
dismissal.  If the allegations are sustained on appeal, 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
consolidated 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
Pacific Lumber's 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 results of operations for
1998 and for 1999 through the date of this report 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 and
identifying mass wasting areas of concern 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 the Company is experiencing 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 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 or about
May 21, 1999, EPIC and other environmental groups sent the Supplemental
EPIC Notice Letter, incorporating the EPIC Notice Letter and threatening to
sue the Company, Pacific Lumber, Scotia LLC, Salmon Creek and various
government agencies for alleged violations of the ESA relating to various
aspects of the Headwaters Agreement.  Separately, 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 Supplemental 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 until December 1999.  A recommended decision by the
Administrative Law Judge is not expected any sooner than early 2000.  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.  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 June 30, 1999, the net unrealized loss on KACC's position in
aluminum forward sales and option contracts (excluding the impact of those
contracts discussed below which have been marked to market),  energy
forward purchase and option contracts, and forward foreign exchange
contracts was approximately $15.5 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 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 June 30, 1999, KACC had sold forward, at fixed prices, approximately
12,000 tons of primary aluminum with respect to 1999.  As of June 30, 1999,
KACC had also entered into option contracts that established a price range
for an additional 130,000, 353,000 and 124,000 tons of primary aluminum for
1999, 2000 and 2001, respectively.

          Additionally, through June 30, 1999, KACC had entered into 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 are "marked to market" each period.  For the
quarter and six-month periods ended June 30, 1999, Kaiser recorded mark-to-
market charges of $13.5 million and $14.1 million in other income (expense)
associated with the above transactions.

          As of June 30, 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, diesel fuel 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 June 30, 1999, KACC had a combination
of fixed price purchase and option contracts for the purchase of
approximately 27,000 MMBtu of natural gas per day during the remainder of
1999.  As of June 30, 1999, KACC also held a combination of fixed price
purchase and option contracts for an average of 249,000 and 232,000 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 June 30, 1999,
KACC had net forward foreign exchange contracts totaling approximately
$138.9 million for the purchase of 208.7 million Australian dollars from
July 1999 through May 2001, in respect of its Australian dollar-denominated
commitments for the remainder of 1999 through May 2001.

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:
          June 30, 1999      $     525.0  $      41.4  $    17.6  $        4.8  $          -  $      588.8
          June 30, 1998            614.8         63.5       17.3           4.0             -         699.6
Operating income (loss)
     for the three months
     ended:
          June 30, 1999              2.2         (3.3)       0.8          (0.1)         (2.2)         (2.6)
          June 30, 1998             56.8         14.7        2.7          (0.3)         (2.9)         71.0

Depreciation, depletion
     and amortization for
     the three months
     ended:
          June 30, 1999             22.6          4.3        1.3           0.4           0.1          28.7
          June 30, 1998             23.4          5.8        0.4           0.2           0.2          30.0
Net sales to
     unaffiliated
     customers for the
     six months ended:
          June 30, 1999          1,004.4         88.1       28.2          12.9             -       1,133.6
          June 30, 1998          1,211.8        115.4       25.8          10.6             -       1,363.6

Operating income (loss)
     for the six months
     ended:
          June 30, 1999            (29.3)        (4.7)      (1.3)          2.2          (4.7)        (37.8)
          June 30, 1998            103.1         24.8        0.2           0.6          (6.4)        122.3
Depreciation, depletion
     and amortization
     for the six months
     ended:
          June 30, 1999             45.5          9.2        3.2           0.6           0.2          58.7
          June 30, 1998             47.3         11.4        1.1           0.5           0.3          60.6
Total assets as of:
          June 30, 1999          2,986.9        879.2      187.5          37.7         174.9       4,266.2
          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 June 30, 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 July 5, 1999, KACC's Gramercy, Louisiana alumina refinery was
extensively damaged by an explosion in the digestion area of the plant.
Approximately 24 employees were injured in the incident, several of them
severely.  The cause of the incident is under investigation by KACC and
governmental agencies.  KACC expects that production at the plant will be
curtailed for many months.  KACC has declared force majeure with respect
to its sales and purchase contracts, but continues to work with customers
to assist them in securing alternative sources of alumina.  More than 30
lawsuits have been filed against KACC alleging, among other things, property
damage and personal injury as a result of the incident.  In addition, a
claim for alleged business interruption losses has been made by a
neighboring business.  The aggregate amount of damages sought in the
lawsuits and other claims cannot be determined at this time.  KACC has
significant amounts of property damage, business interruption, liability
and workers compensation insurance coverage relating to the Gramercy
incident.  Deductibles and self-retention provisions under the insurance
coverage for the Gramercy incident total $5.0 million.  The incident will
cause KACC to incur incremental costs for clean-up and other activities in
the second half of 1999 and will cause the affected operations to incur
certain operating losses until production can be restored.  Further,
depending on the outcome of the ongoing investigations by various
regulatory agencies, KACC could also be subject to certain fines or
penalties, which may not be covered by insurance.  However, based on what
is known to date, Kaiser currently believes that the financial impact of
this incident (in excess of the deductibles and self-retention provisions)
will be largely offset by insurance coverage.  The accompanying consolidated
financial statements as of and for the periods ended June 30, 1999 do not
include any provisions for the Gramercy incident.


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" and "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

          Incident at Gramercy Facility
          On July 5, 1999, KACC's Gramercy, Louisiana alumina refinery was
extensively damaged by an explosion in the digestion area of the plant.
Approximately 24 employees were injured in the incident, several of them
severely.  The cause of the incident is under investigation by KACC and
government agencies.  KACC's continuing investigation suggests that the
incident was caused by a power distribution interruption involving the
plant's on-site power house that caused process flow pumps to cease
operating.  KACC has also identified certain other conditions that were
present at the time of the incident and continues to investigate these
and other matters.  KACC expects that production at the plant will be
curtailed for many months.  KACC has declared force majeure with respect
to its sales and purchase contracts but continues to work with customers
to assist them in securing alternative sources of alumina.  More than 30
lawsuits have been filed against KACC alleging, among other things, property
damage and personal injury as a result of the incident.  In addition, a
claim for alleged business interruption losses has been made by a
neighboring business.  The aggregate amount of damages sought in the
lawsuits and other claims cannot be determined at this time.  KACC has
significant amounts of property damage, business interruption, liability
and workers compensation insurance coverage relating to the Gramercy
incident.  Deductibles and self-retention provisions under the insurance
coverage for the Gramercy incident total $5.0 million.  The incident will
cause KACC to incur incremental costs for clean-up and other activities in
the second half of 1999 and will cause the affected operations to incur
certain operating losses until production can be restored.  Further,
depending on the outcome of the ongoing investigations by various
regulatory agencies, KACC could also be subject to certain fines or
penalties, which may not be covered by insurance.  However, based on what
is known to date, Kaiser currently believes that the financial impact of
this incident (in excess of the deductibles and self-retention provisions)
will be largely offset by insurance coverage.  The accompanying consolidated
financial statements as of and for the periods ended June 30, 1999 do not
include any provisions for the Gramercy incident.  KACC has announced that
its intention is to rebuild the Gramercy facility assuming that it is able
to reach acceptable agreements with the various stakeholders to ensure the
plant's competitive future.  KACC hopes to have the plant operating at a
reduced production level in mid-2000 and to have the plant completely
operational by the end of 2000.  However, there can be no assurance that
the Gramercy facility will be made operational on this schedule.

          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.  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.

          As a result of the USWA strike, KACC 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 per year of production capacity out of a total combined production
capacity of 273,000 tons per year at the facilities).  The first of the two
Mead potline restarts began in March 1999 and was completed during the
second quarter of 1999.  Restart activities on the second of the two Mead
potlines commenced during the second quarter of 1999, and Kaiser expects
the line to be fully operational before the end of the third quarter of
1999.  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 was eliminated or substantially reduced as of January 1999
(excluding the impacts of the restart costs 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.

          KACC and the USWA continue to communicate.   A series of
bargaining sessions are scheduled for August 1999.  The objective of KACC
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.

          Strategic Initiatives
          Kaiser has devoted significant efforts toward 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 completed
the sale of its interest in AKW, an aluminum wheel joint venture, to its
partner, Accuride Corporation for $70.4 million.  The cash sale represents
a continuation of Kaiser's strategy to focus its resources and efforts in
industry segments that are considered most attractive and in which it
believes it is well positioned to capture value.

          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 90%-owned Valco smelter operated only one of its five
potlines during most of 1998.  Each of Valco's potlines is capable of
producing approximately 40,000 tons per year of primary aluminum.  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.  However, 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, an operating rate that it reached during the second quarter of
1999.  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 and six months ended June 30, 1999 and 1998.


<TABLE>
<CAPTION>

                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                                    JUNE 30,                    JUNE 30,
                                          --------------------------  --------------------------
                                               1999          1998          1999          1998
                                          ------------  ------------  ------------  ------------
                                                          (IN MILLIONS OF DOLLARS,
                                                        EXCEPT SHIPMENTS AND PRICES)
<S>                                       <C>           <C>           <C>           <C>

Shipments:(1)
     Alumina:
          Third party                            611.4         652.5       1,098.4       1,077.1
          Intersegment                           189.3         196.6         339.6         412.4
                                          ------------  ------------  ------------  ------------
               Total alumina                     800.7         849.1       1,438.0       1,489.5
                                          ------------  ------------  ------------  ------------
     Primary aluminum:
          Third party                             69.0          68.3         131.9         148.8
          Intersegment                            46.3          42.5          85.8          86.1
                                          ------------  ------------  ------------  ------------
               Total primary aluminum            115.3         110.8         217.7         234.9
                                          ------------  ------------  ------------  ------------
     Flat-rolled products                         59.0          63.6         111.5         123.3
                                          ------------  ------------  ------------  ------------
     Engineered products                          43.5          44.2          84.9          90.0
                                          ------------  ------------  ------------  ------------
Average realized third party sales
     price: (2)
     Alumina (per ton)                    $        170  $        197  $        171  $        198
     Primary aluminum (per pound)                  .66           .70           .65           .71
Net sales:
     Bauxite and alumina:
          Third party (includes net sales
               of bauxite)                $      110.8  $      136.9  $      200.5  $      230.2
          Intersegment                            29.6          36.1          52.6          78.3
                                          ------------  ------------  ------------  ------------
               Total bauxite and alumina         140.4         173.0         253.1         308.5
                                          ------------  ------------  ------------  ------------
     Primary aluminum:
          Third party                            100.5         105.8         189.6         232.0
          Intersegment                            63.1          61.0         112.2         127.8
                                          ------------  ------------  ------------  ------------
               Total primary aluminum            163.6         166.8         301.8         359.8
                                          ------------  ------------  ------------  ------------
     Flat-rolled products                        155.3         197.0         303.6         391.3
     Engineered products                         137.8         156.0         271.3         318.6
     Minority interests                           20.6          19.2          39.4          39.8
     Eliminations                                (92.7)        (97.2)       (164.8)       (206.2)
                                          ------------  ------------  ------------  ------------
               Total net sales            $      525.0  $      614.8  $    1,004.4  $    1,211.8
                                          ============  ============  ============  ============
Operating income (loss)                   $        2.2  $       56.8  $      (29.3) $      103.1
                                          ============  ============  ============  ============
Income (loss) before income taxes and
     minority interests                   $      (24.0) $       27.3  $      (81.9) $       46.3
                                          ============  ============  ============  ============
Capital expenditures and investments in
     unconsolidated affiliates            $       13.8  $       23.0  $       30.3  $       36.7
                                          ============  ============  ============  ============



<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 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>

          Overview
          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 experienced a steady decline during
the year, beginning the year in the $.70 to $.75 per pound range and ending
the year in the low $.60 per pound range.  During the first quarter of
1999, the AMT Price was in the $.57 to $.59 per pound range most of the
quarter, but increased in March 1999 and ended the second quarter at
approximately $.67 per pound.  The AMT Price for the week ended July 30,
1999 was approximately $.68 per pound.

          Net sales

          Bauxite and alumina.  Third party net sales of alumina declined
19% for the quarter ended June 30, 1999 as compared to the same period in
1998 as a result of a 14% decline in third party average realized price and
a 6% decline in third party alumina shipments.  The decline in 1999 third
party average realized prices resulted from lower first quarter 1999 market
prices for primary aluminum on Kaiser's alumina sales contracts,
substantially all of which are linked (on a lagged basis of up to three
months) to changes in primary aluminum market prices.  Although market
prices for primary aluminum recovered somewhat during the second quarter of
1999, the beneficial impacts of these price increases on the segment's
operating income will not be fully realized until the third quarter of
1999.  The impact of lower prices for primary aluminum in 1999 on Kaiser's
third party average realized prices was partially offset by allocated net
gains from the KACC hedging activities.  The decline in third party
shipments of alumina between the second quarter of 1999 and 1998 resulted
primarily from differences in the timing of shipments rather than any
specific operating trend.  Intersegment net sales for the second quarter of
1999 declined by 22% as compared to the same period in 1998.  The decline
in net sales was primarily due to a 14% decline in intersegment average
realized price due to lower primary aluminum prices as well as a decline in
intersegment shipments, resulting from potline curtailments at Kaiser's
Washington and Valco smelters.

          For the six-month period ended June 30, 1999, third party net
sales of alumina were 12% lower than the comparable period in 1998 as a 14%
decline in average realized prices was only partially offset by a 2%
increase in third party shipments.  The decline in average realized prices
during the first six months of 1999 as compared to 1998 was attributable to
the linkage of third party sales contracts to primary aluminum prices as
more fully described above, offset by allocated net gains from KACC's
hedging activities.  The increase in year-over-year shipments was the
result of the timing of individual shipments, rather than a specific
operating trend.  Intersegment net sales for the six-month period ended
June 30, 1999 declined by 33% as compared to the same period in 1998.  The
decline in net sales was primarily due to the 14% decline in intersegment
average realized price due to lower primary aluminum prices as well as
reduced intersegment shipments, resulting from potline curtailments at
Kaiser's Washington and Valco smelters.

          Primary aluminum.  Third party net sales of primary aluminum for
the second quarter of 1999 were down 5% as compared to the same period in
1998 primarily as a result of a 6% decrease in average realized third party
sales prices, reflecting lower market prices offset, in part, by allocated
net gains from KACC's hedging activities.  Partially offsetting the decline
in average realized price was a 1% increase in third party shipments.
Intersegment net sales in the second quarter of 1999 were up approximately
4% over 1998.  Intersegment shipments increased 9% from the comparable
prior year period while average realized price dropped by 5%.  The decline
in average realized price resulted from lower market prices for primary
aluminum in 1999.  The increase in intersegment shipments between 1999 and
1998 was due to the timing of shipments to Kaiser's fabricated business
units, as on a year-to-date basis intersegment shipments were essentially
flat.

          For the six-month period ended June 30, 1999, third party net
sales of primary aluminum declined approximately 16% from the comparable
period in 1998, reflecting an 8% decline in third party average realized
prices and an 11% reduction in third party shipments.  The decline in third
party average realized price reflects lower 1999 market prices for primary
aluminum offset, in part, by allocated net gains from KACC's hedging
activities.  The reduction in third party shipments reflects the impact of
the potline curtailments at KACC's Washington smelters.  Intersegment net
sales for the first half of 1999 were down 12% as compared to the same
period in 1998.  Intersegment average realized prices were down 12%
reflecting lower market prices for aluminum.  Intersegment shipments were
essentially flat.

          Flat-rolled products.  Net sales of flat-rolled products for the
second quarter of 1999 declined by 21% compared to the second quarter of
1998 as a result of a 14% decline in average realized prices and a 7%
decline in shipments.  The reduction in shipments was due to reduced demand
in 1999 for aerospace heat treat products, offset, in small part, by
increased shipments of general engineering products.  The decline in 1999
average realized prices resulted from a shift of product mix (from
aerospace products, which have a higher price and operating margin, to
other products) as well as the impact of lower market prices for primary
aluminum.

          For the six-month period ended June 30, 1999, net sales of flat-
rolled products declined by 22% from the comparable period in 1998 as a
result of a 14% decline in average realize price and a 10% decline in
product shipments.  The declines in year-to-date 1999 prices and shipments
as compared to 1998 were attributable to the same factors described above
for the second quarter of 1999.

          Engineered products.  Second quarter 1999 net sales of engineered
products declined by approximately 12% compared to the second quarter of
1998, reflecting a 10% decline in average realized prices and a 2% decline
in product shipments.  The decline in quarterly shipments was due to
reduced demand in 1999 for aerospace products offset almost entirely by a
strong increase in 1999 demand for ground transportation products.  The
reduction in average realized price between periods was attributable to the
change in product mix (lower aerospace shipments offset by higher ground
transportation shipments) as well as lower 1999 market prices for primary
aluminum.  For the six-month period ended June 30, 1999, net sales of
engineered products declined by approximately 15% from the comparable
period in 1998, as a result of a 10% decline in average realized prices and
a 6% decline in product shipments.  The reasons for the year-to-date price
and volume declines were the same as the factors that affected the second
quarter of 1999.

     Operating income (loss)

          Bauxite and alumina.  Operating income for the quarter and six-
month periods ended June 30, 1999 was down significantly from the
comparable periods of 1998 primarily as a result of the price and, to a
lesser extent, the volume factors discussed above.

          Primary aluminum.  Operating income for the quarter and six-month
periods ended June 30, 1999 was down significantly from the comparable
periods of 1998.  The most significant component of this decline was the
reduction in average realized prices discussed above.  However, also
included in 1999 results were the adverse impact of the Valco and
Washington smelter potline curtailments (including the fact that there is
no mitigating compensation being earned in 1999 for the Valco potline
curtailments) and costs of approximately $2.5 million and $9.6 million for
the quarter and six-month periods ended June 30, 1999, respectively,
associated with preparing and restarting potlines at the Valco and
Washington smelters.

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

          Engineered products.  Operating income for the 1999 quarter and
year-to-date periods declined from the comparable periods in 1998 as a
result of the reduced equity in earnings from AKW as well as the product
mix shift 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 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 and six months ended June 30, 1999 and 1998.


<TABLE>
<CAPTION>

                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                                    JUNE 30,                    JUNE 30,
                                          --------------------------  --------------------------
                                               1999          1998          1999          1998
                                          ------------  ------------  ------------  ------------
                                                      (IN MILLIONS OF DOLLARS, EXCEPT
                                                           SHIPMENTS AND PRICES)
<S>                                       <C>           <C>           <C>           <C>
Shipments:
     Lumber: (1)
          Redwood upper grades                     6.4          11.9          14.2          22.1
          Redwood common grades                   28.9          59.6          67.6         113.5
          Douglas-fir upper grades                 2.5           1.6           4.5           3.5
          Douglas-fir common grades               12.4          12.1          27.7          21.3
          Other                                    1.9           3.2           4.4           5.7
                                          ------------  ------------  ------------  ------------
               Total lumber                       52.1          88.4         118.4         166.1
                                          ============  ============  ============  ============
     Wood chips (2)                               31.2          48.6          76.6          80.8
                                          ============  ============  ============  ============
Average sales price:
     Lumber: (3)
          Redwood upper grades            $      1,499  $      1,513  $      1,454  $      1,503
          Redwood common grades                    625           550           588           529
          Douglas-fir upper grades               1,322         1,296         1,299         1,281
          Douglas-fir common grades                450           331           410           340
     Wood chips (4)                                 74            75            78            70

Net sales:
     Lumber, net of discount              $       36.6  $       57.3  $       78.2  $      105.8
     Wood chips                                    2.3           3.7           5.9           5.7
     Cogeneration power                            0.7           1.2           1.3           1.8
     Other                                         1.8           1.3           2.7           2.1
                                          ------------  ------------  ------------  ------------
               Total net sales            $       41.4  $       63.5  $       88.1  $      115.4
                                          ============  ============  ============  ============
Operating income (loss)                   $       (3.3) $       14.7  $       (4.7) $       24.8
                                          ============  ============  ============  ============
Operating cash flow (5)                   $        1.0  $       20.5  $        4.5  $       36.2
                                          ============  ============  ============  ============
Income (loss) before income taxes (6)     $       (9.7) $       (2.7) $      216.5  $       (6.9)
                                          ============  ============  ============  ============
Capital expenditures                      $        5.2  $        3.2  $       17.6  $        6.0
                                          ============  ============  ============= ============


<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 three and six month periods ended June 30,
1999 decreased from the comparable 1998 periods due primarily to lower
shipments of upper and common grade redwood lumber offset somewhat by
higher prices for common grade redwood and Douglas-fir 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.  As was the case in the first quarter of 1999, the diminished
supply of approved THPs, combined with seasonal restrictions on logging
operations, continued to affect log supplies in the second quarter.   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
three and six months ended June 30, 1999 as compared to  operating income
for the comparable 1998 periods, primarily due to decreases in net sales
discussed above.  Results for the first half of 1999 were also affected
by higher costs and expenses 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
               Loss before income taxes for the three months ended June 30,
1999 increased from the comparable 1998 period, primarily due to the
operating loss discussed above.  The impact of the loss was partially
offset by an increase in investment, interest and other income as a result
of investing the net proceeds from the sale of the Headwaters Timberlands,
as well as higher earnings from marketable securities.  Income before
income taxes for the first half 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.  Income
before income taxes for the first half of 1999 was also favorably affected
by the increase in investment, interest and other income 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           SIX MONTHS ENDED
                                                    JUNE 30,                    JUNE 30,
                                          -------------------------   --------------------------
                                               1999          1998          1999          1998
                                          ------------  ------------  ------------  ------------
                                                          (IN MILLIONS OF DOLLARS)
<S>                                       <C>           <C>           <C>           <C>
Net sales:
     Real estate                          $       17.6  $       17.3  $       28.2  $       25.8
     SHRP, Ltd.                                    4.8           4.0          12.9          10.6
                                          ------------  ------------  ------------  ------------
          Total net sales                 $       22.4  $       21.3  $       41.1  $       36.4
                                          ============  ============  ============  ============

Operating income (loss):
     Real estate                          $        0.8  $        2.7  $       (1.3) $        0.2
     SHRP, Ltd.                                   (0.1)         (0.3)          2.2           0.6
                                          ------------  ------------  ------------  ------------
          Total operating income          $        0.7  $        2.4  $        0.9  $        0.8
                                          ============  ============  ============  ============

Income (loss) before income taxes and
     minority interests:
     Real estate                          $        3.3  $       10.8  $        2.8  $       10.6
     SHRP, Ltd.                                      -          (1.0)          2.0          (0.8)
                                          ------------  ------------  ------------  ------------
          Total income before income
               taxes and minority
               interests                  $        3.3  $        9.8  $        4.8  $        9.8
                                          ============  ============  ============  ============


</TABLE>

               Net sales
               Net sales for the quarter and six months ended June 30, 1999
increased from the same prior year periods primarily due to increases in
pari-mutual wagering at Sam Houston Race Park.  In addition, net sales for
the six months ended June 30, 1999 increased due to higher revenues from
the Company's real estate development project in Puerto Rico.

               Operating income (loss)
               Operating income decreased for the quarter ended June 30,
1999 from the same period in 1998 primarily due to lower margins on real
estate sales.  Operating income was substantially unchanged for the six
months ended June 30, 1999 from the comparable 1998 period as improved
results for the Sam Houston Race Park were offset by a decline in margins
on real estate sales.

               Income  before income taxes
               Income before income taxes for the quarter and six months
ended June 30, 1999 decreased when compared to income for the same periods
in 1998 which included a gain on the sale of a portion of the Company's
Waterwood development project.

     OTHER ITEMS NOT DIRECTLY RELATED TO INDUSTRY SEGMENTS


<TABLE>
<CAPTION>

                                               THREE MONTHS ENDED           SIX MONTHS ENDED
                                                    JUNE 30,                    JUNE 30,
                                          --------------------------  --------------------------
                                               1999          1998          1999          1998
                                          ------------  ------------  ------------  ------------
                                                          (IN MILLIONS OF DOLLARS)
<S>                                       <C>           <C>           <C>           <C>
Operating loss                            $       (2.2) $       (2.9) $       (4.7) $       (6.4)
Loss before income taxes and minority
     interests                                    (6.2)         (5.7)        (11.5)        (11.5)


</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, which
are not attributable to the Company's industry segments.

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

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

          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.

     PARENT COMPANY AND MGHI

          The various credit instruments of KACC, 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 June 30, 1999, no dividends could be paid by MGHI.
Pursuant to the terms of the KACC Credit Agreement, Kaiser and KACC are
prohibited from paying any dividends with respect to their common stock.
As of June 30, 1999, the Company's other subsidiaries (principally real
estate) had an aggregate of nonrestricted cash and unused borrowing
availability of approximately $32.0 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 June 30, 1999, the Company (excluding its subsidiaries) had
cash and marketable securities of approximately $41.7 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 June 30, 1999, Kaiser had long-term debt of $962.7 million
compared with $963.0 million at December 31, 1998.

          At June 30, 1999, $273.7 million (of which $73.7 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 six months ended June
30, 1999 were $30.3 million.  The only significant expenditure was the
purchase of the remaining 45% interest in KLHP for approximately $10.0
million.   Total 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, prior to any consideration of plans
to rebuild the Gramercy facility.  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 June 30, 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 June 30, 1999, $21.3 million of total availability existed under the
Pacific Lumber Credit Agreement, no borrowings were outstanding and letters
of credit outstanding amounted to $12.1 million.

           The Escrowed Funds, including accumulated interest, were $288.2
million as of June 30, 1999 and are to be made available as necessary to
support Scotia LLC's Timber Notes.  The Escrowed Funds will be released by
the Escrow Agent only in accordance with the terms of the Escrow Agreement.

          On July 16, 1999, Scotia LLC's Line of Credit Agreement was
extended for an additional year to July 16, 2000.  Interest on initial
borrowings outstanding for less than six months was increased to the Base
Rate (as defined in the agreement) plus 0.25% or a one month or six month
LIBOR rate plus 1%.

          On the July 20, 1999 note payment date, Scotia LLC had $6.5
million in cash available to pay the $31.6 million in interest due on the
Timber Notes.  Scotia LLC borrowed the remaining $25.1 million in funds
under the terms of the Line of Credit Agreement.  In addition, Scotia LLC
paid approximately $2.8 million of principal on the Timber Notes (the
amount equal to Scheduled Amortization) using funds received as a capital
contribution from Pacific Lumber.  Funds for the $2.8 million principal
payment were provided from the Escrowed Funds and were released in
accordance with the terms of the Escrow Agreement.  The indenture governing
the Timber Notes was amended to allow the capital contribution from Pacific
Lumber to be applied as a principal payment.

          MGI and its subsidiaries anticipate that existing cash, cash
equivalents, marketable securities, funds available under the Escrow
Agreement 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 June 30, 1999, the Company's real estate subsidiaries had
approximately $12.5 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 $0.7 million.  The Company
believes that the existing cash and credit facilities of its real estate
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.

          As of June 30, 1999, SHRP, Ltd. had cash and cash equivalents of
$10.4 million and a $1.7 million line of credit available to fund its
operating activities.  Long-term debt, excluding $44.2 million of debt
held by affiliates, was $1.3 million as of June 30, 1999.  SHRP, Ltd.
is able to defer cash interest payments on its long-term debt until
September 1, 2001 or until certain conditions are met, and to defer the
payment of management fees until two consecutive interest payments on
its long-term debt have been paid in cash.  The deferral of these items has
significantly improved SHRP Ltd.'s liquidity.

          With respect to long-term liquidity, although only $1.3 million
of SHRP Ltd.'s debt is owned by non-affiliates, there can be no assurance
that SHRP, Ltd. will be able to repay or refinance its long-term debt or
that alternative sources of funding will be available, if needed.

TRENDS

          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.

     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 Pacific Lumber's 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 available 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 required, 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 continues to be required in connection
with their 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 third
quarter will continue to 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 receiving approvals of its THPs similar to
those it has been experiencing.  Furthermore, there can be no assurance
that certain pending legal, 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 Part II. Item 1. "Legal Proceedings" and 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 its individual situation.  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 June 30, 1999, Kaiser estimates that approximately $3 million
of year 2000 expenditures are yet to be incurred.  Such remaining amounts
will be incurred over the balance of 1999, primarily in the third quarter
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.  In total, Kaiser believes that its
remediation and testing efforts are approximately 85% complete at July 31,
1999.  The balance is expected to be substantially complete by the end of
the third quarter of the year.  Kaiser plans to commit the necessary
resources for these 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 and customer base.
Direct contact has been made, or is in progress, with parties which are
deemed to be particularly 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.  Formal contingency plans have been completed
for approximately 75% of Kaiser's facilities and their individual systems
as of July 31, 1999.  Contingency plans for the remaining facilities and
systems are expected to be completed by October 31, 1999.  When complete,
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 and the financial systems for Britt, all modifications
and testing have been completed.  Modifications and testing of the
cogeneration plant and the financial systems for Britt 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 third 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 programs, 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


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.

KAISER LITIGATION

          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 portion of Note 7 to the Consolidated Financial Statements contained in
this report under the heading "Asbestos Contingencies" is incorporated
herein by reference.  See Part I, Item 3. "Legal Proceedings--Kaiser
Litigation--Asbestos-related Litigation" in the Company's Form 10-K for the
year ended December 31, 1998.

PACIFIC LUMBER LITIGATION

          With respect to the Mateel action, this case has been set for
trial on November 15, 1999.

          On March 31, 1999, the EPIC-SYP/Permits lawsuit was filed against
Pacific Lumber, Salmon Creek, Scotia LLC and others in the Superior Court
of Sacramento County (subsequently transferred to the Superior Court of
Humboldt County pursuant to Pacific Lumber's motion).  This action alleges,
among other things, that the CDF and the 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 the CDFG's decisions approving the Final SYP and the Permits
issued by California.

          On March 31, 1999, the USWA lawsuit was also filed against
Pacific Lumber, Salmon Creek and Scotia LLC in the California Superior
Court of Sacramento County (subsequently transferred to the Superior Court
of Humboldt County pursuant to Pacific Lumber's motion).  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 the USWA lawsuit and the EPIC-SYP/Permits lawsuit.
Although uncertainties are inherent in the final outcome of 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.

          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 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          The annual meeting of stockholders of the Company was held on May
19, 1999, at which meeting the stockholders voted to elect Messrs.
Rosenberg, Cruikshank and Hurwitz, management's slate of nominees, as
directors of the Company, and voted to reapprove the MAXXAM 1994 Omnibus
Employee Incentive Plan.  Stockholders voted against a proposal to
declassify the Company's Board of Directors and against a proposal
regarding cumulative voting for the election of the Company's Common
Directors.

          The results of the matters voted at the meeting are shown below.

NOMINEES FOR DIRECTOR

          The nominees for election as directors of the Company are listed
below, together with voting information for each nominee.  Mr. Paul N.
Schwartz and Mr. Ezra G. Levin continued as directors for the Company.

          NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK

          Stanley D. Rosenberg - 4,276,098 votes for, 207,096 votes
               withheld and -0- broker non-votes.
          Robert J. Cruikshank - 4,276,211 votes for, 206,983 votes
               withheld and -0- broker non-votes.
          Howard M. Metzenbaum - 949,457 votes for, 41,421 votes withheld
               and -0- broker non-votes.
          Abner J. Mikva - 949,457 votes for, 41,421 votes withheld and -0-
               broker non-votes.

          NOMINEES FOR ELECTION BY HOLDERS OF COMMON STOCK AND CLASS A
               PREFERRED STOCK

          Charles E. Hurwitz - 10,854,304 votes for, 216,599 votes withheld
               and -0- broker non-votes.

PROPOSAL TO REAPPROVE THE MAXXAM 1994 OMNIBUS EMPLOYEE INCENTIVE PLAN

          10,779,032 votes for, 1,180,816 votes against, 100,932 votes
               abstaining and -0- broker non-votes.

PROPOSAL TO DECLASSIFY THE COMPANY'S BOARD OF DIRECTORS

          1,810,373 votes for, 10,234,009 votes against, 16,398 votes
               abstaining and -0- broker non-votes.

PROPOSAL REGARDING CUMULATIVE VOTING FOR THE ELECTION OF THE COMPANY'S
     COMMON DIRECTORS

          1,596,453 votes for, 10,447,028 votes against, 17,299 votes
               abstaining and -0- broker non-votes.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

A.        EXHIBITS:

          *3.1      Amended and Restated By-laws of MAXXAM Inc. dated
                    May 17, 1999

          4.1       First Supplemental Indenture, dated as of July 16,
                    1999,  to the Indenture between Scotia LLC and State
                    Street Bank and Trust Company regarding Scotia LLC's
                    Class A-1, Class A-2 and Class A-3 Timber
                    Collateralized Notes (incorporated herein by reference
                    to Exhibit 4.1 to the Scotia LLC June 1999 Form 10-Q)

          4.2       First Amendment, dated as of July 16, 1999, to the Line
                    of Credit Agreement among Scotia LLC, the financial
                    institutions party thereto and Bank of America National
                    Trust and Savings Association, as agent (incorporated
                    herein by reference to Exhibit 4.2 to the Scotia LLC
                    June 1999 Form 10-Q)

          *27       Financial Data Schedule for the six months ended June
                    30, 1999

     *    Included with this filing

B.        REPORTS ON FORM 8-K:

          On July 1, 1999, the Company filed a current report on Form 8-K
(under Item 5) dated June 29, 1999, concerning a press release issued by
Kaiser, in which the Company, directly or indirectly, holds an approximate
63% voting interest.

          On July 9, 1999, the Company filed a current report on Form 8-K
(under Item 5) dated July 5, 1999, concerning press statements issued by
KACC, a wholly owned subsidiary of Kaiser.


                                 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.


                                           MAXXAM INC.




Date: August 13, 1999           By:      PAUL N. SCHWARTZ
                                         Paul N. Schwartz
                                    President, Chief Financial
                                       Officer and Director
                                  (Principal Financial Officer)


Date: August 13, 1999           By:    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 environmental 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.

Elk River Timberlands:  The 7,700 acres of timberlands transferred to
     Pacific Lumber upon the consummation of the Headwaters Agreement

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 and transferred to the Superior
     Court of Humboldt County on July 13, 1999 (No. CV-990445)

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

FASB:  The Financial Accounting Standards Board

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 regarding the future sale of a portion of the Grizzly Creek
     grove

Grizzly Creek Grove: A grove of approximately 1,000 acres of primarily old
     growth timber owned by Pacific Lumber on land owned by Scotia LLC

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 credit facility between KACC and a group of
     lenders 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

Line of Credit Agreement: The agreement between a group of lenders and
     Scotia LLC pursuant to which Scotia LLC may borrow in order to pay
     interest on the Timber Notes

LTSY:  Long-term sustained yield

Mateel action:  An action entitled Mateel Environmental Justice Foundation
     v. Pacific Lumber, Scotia Pacific Holding Company, Salmon Creek
     Corporation and MAXXAM Group Inc. (No. DR 980301) brought on May 27,
     1998 in the Superior Court of Humboldt County

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

NLRB:  The National Labor Relations Board

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 Scotia LLC

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 LLC June 1999 Form 10-Q:  Scotia LLC's Quarterly Report on Form 10-Q
     for the quarter ended June 30, 1999, File No. 333-63825

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

SFAS No. 137:  Statement of Financial Accounting Standards No. 137,
     "Accounting for Derivative Instruments and Hedging Activities -
     Deferral of the Effective Date of SFAS No. 133"

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

Supplemental EPIC Notice Letter:  A notice sent to the Company, Pacific
     Lumber, Scotia LLC, Salmon Creek and various government agencies on or
     about May 21, 1999 from EPIC, the Sierra Club and other environmental
     groups incorporating the EPIC Notice Letter and alleging violations of
     the ESA relating to various aspects of the Headwaters Agreement

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 and transferred to the
     Superior Court of Humboldt County on July 13, 1999 (No. CV-990452)

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

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