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


                                 FORM 10-Q

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

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

               FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998

                       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 April 29, 1998:  7,000,597


<PAGE>

                             TABLE OF CONTENTS


                                                                      PAGE
PART I. - FINANCIAL INFORMATION

     Item 1.   Financial Statements:
          Consolidated Balance Sheet at March 31, 1998
               and December 31, 1997                                  3
          Consolidated Statement of Operations for the three
               months ended March 31, 1998 and 1997                   4
          Consolidated Statement of Cash Flows for the three
               months ended March 31, 1998 and 1997                   5
          Condensed Notes to Consolidated Financial Statements        6

     Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations               11

PART II. - OTHER INFORMATION

     Item 1.   Legal Proceedings                                      19
     Item 6.   Exhibits and Reports on Form 8-K                       20
     Signature                                                        S-1

<PAGE>

                        MAXXAM INC. AND SUBSIDIARIES

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


<TABLE>
<CAPTION>

                                                   MARCH 31,    DECEMBER 31,
                                                      1998          1997
                                                 ------------  ------------
                                                  (Unaudited)
                     ASSETS
<S>                                              <C>           <C>
Current assets:
     Cash and cash equivalents                   $      148.6  $      164.6 
     Marketable securities                               84.1          84.6 
     Receivables:                                             
          Trade, net of allowance for doubtful
               accounts of $5.9                         269.9         255.9 
          Other                                          72.5         126.3 
     Inventories                                        584.1         629.6 
     Prepaid expenses and other current assets          183.3         175.1 
                                                 ------------  ------------
               Total current assets                   1,342.5       1,436.1 
Property, plant and equipment, net of
     accumulated depreciation of $870.0 and
     $845.6, respectively                             1,317.5       1,320.9 
Timber and timberlands, net of accumulated
     depletion of $170.4 and $169.2,
     respectively                                       298.8         299.1 
Investments in and advances to unconsolidated
     affiliates                                         160.5         159.5 
Deferred income taxes                                   478.8         479.9 
Long-term receivables and other assets                  424.8         418.7 
                                                 ------------  ------------
                                                 $    4,022.9  $    4,114.2 
                                                 ============  ============
      LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                            $      164.4  $      187.3 
     Accrued interest                                    36.6          68.7 
     Accrued compensation and related benefits          141.6         159.3 
     Other accrued liabilities                          171.6         174.9 
     Payable to affiliates                               83.9          82.9 
     Short-term borrowings and current
          maturities of long-term debt                   70.4          69.0 
                                                 ------------  ------------
               Total current liabilities                668.5         742.1 
Long-term debt, less current maturities               1,877.6       1,888.0 
Accrued postretirement medical benefits                 725.2         730.1 
Other noncurrent liabilities                            577.7         586.3 
                                                 ------------  ------------ 
               Total liabilities                      3,849.0       3,946.5 
                                                 ------------  ------------ 
Commitments and contingencies
Minority interests                                      174.9         170.6 
                                                 ------------  ------------ 
Stockholders' deficit:
     Preferred stock, $.50 par value; 12,500,000
          shares authorized; Class A $.05
          Non-Cumulative Participating                     .3            .3 
Convertible Preferred Stock; shares issued:
          669,701
     Common stock, $.50 par value; 28,000,000
          shares authorized; shares issued: 
          10,063,359                                      5.0           5.0 
     Additional capital                                 222.8         222.8 
     Accumulated deficit                               (116.6)       (118.5)
     Pension liability adjustment                        (3.3)         (3.3)
     Treasury stock, at cost (shares held:
          preferred - 845; common:  3,062,762)         (109.2)       (109.2)
                                                 ------------  ------------ 
               Total stockholders' deficit               (1.0)         (2.9)
                                                 ------------  ------------ 
                                                 $    4,022.9  $    4,114.2 
                                                 ============  ============ 


<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>

<PAGE>

                        MAXXAM INC. AND SUBSIDIARIES

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


<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                             March 31,
                                                    --------------------------
                                                         1998          1997
                                                    ------------  ------------
                                                            (Unaudited)
<S>                                                 <C>           <C>
Net sales:
     Aluminum operations                            $      597.0  $      547.4 
     Forest products operations                             51.9          66.8 
     Real estate and other operations                       15.1          17.4 
                                                    ------------  ------------
                                                           664.0         631.6 
                                                    ------------  ------------

Costs and expenses:
     Cost of sales and operations:
          Aluminum operations                              499.6         460.7 
          Forest products operations                        33.1          38.0 
          Real estate and other operations                   9.7          10.0 
     Selling, general and administrative expenses           42.2          44.5 
     Depreciation and depletion                             28.1          29.4 
                                                    ------------  ------------
                                                           612.7         582.6 
                                                    ------------  ------------

Operating income                                            51.3          49.0 

Other income (expense):
     Investment, interest and other income                  11.6          10.9 
     Interest expense                                      (53.9)        (53.1)
                                                    ------------  ------------
Income before income taxes and minority interests            9.0           6.8 
Provision for income taxes                                  (3.2)         (2.7)
Minority interests                                          (3.9)         (3.4)
                                                    ------------  ------------
Net income                                          $        1.9  $         .7 
                                                    ============  ============

Basic earnings per common share                     $       0.28  $        .08 
                                                    ============  ============

Diluted earnings per common and common equivalent
     share                                          $       0.25  $        .07 
                                                    ============  ============

<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>

<PAGE>

                        MAXXAM INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENT OF CASH FLOWS
                          (IN MILLIONS OF DOLLARS)

<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                               March 31,
                                                      --------------------------
                                                           1998          1997
                                                      ------------  ------------
                                                              (Unaudited)
<S>                                                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                       $        1.9  $         .7 
     Adjustments to reconcile net income to net cash
          used for operating activities:
          Depreciation and depletion                          28.1          29.4 
          Net sales (purchases) of marketable
               securities                                      4.7           (.9)
          Minority interests                                   3.9           3.4 
          Amortization of deferred financing costs
               and discounts on long-term debt                 6.3           6.3 
          Amortization of excess investment over
               equity in net assets of
               unconsolidated affiliates                       2.5             - 
          Equity in (earnings) loss of unconsolidated
               affiliates, net of dividends received          (4.5)          7.8 
          Net gain on sale of real estate, mortgage
               loans and other assets                         (2.0)            - 
          Increase (decrease) in cash resulting from
               changes in:
               Receivables                                    30.5         (34.8)
               Payable to affiliates and other
                    liabilities                              (44.0)         (2.9)
               Inventories                                    43.5          (7.9)
               Accrued interest                              (31.9)        (26.0)
               Prepaid expenses and other assets                .8         (27.5)
               Accounts payable                              (22.9)        (39.7)
               Accrued and deferred income taxes              (4.7)           .1 
          Other                                               (4.5)         (1.8)
                                                      ------------  ------------ 
          Net cash provided by (used for) operating
               activities                                      7.7         (93.8)
                                                      ------------  ------------ 
CASH FLOWS FROM INVESTING ACTIVITIES:
     Net proceeds from disposition of property and
          investments                                          6.5           7.1 
     Capital expenditures                                    (22.4)        (27.2)
     Investment in subsidiaries and joint ventures            (1.6)         (7.1)
     Other                                                     3.1          (2.7)
                                                      ------------  ------------ 
          Net cash used for investing activities             (14.4)        (29.9)
                                                      ------------  ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under revolving credit agreements            -          42.0 
     Proceeds from issuance of long-term debt                  2.0          19.0 
     Redemptions, repurchases and principal payments
          on long-term debt                                  (12.7)        (63.7)
     Dividends paid to Kaiser's minority preferred
          stockholders                                           -          (2.1)
     Redemption of preference stock                           (1.1)         (1.6)
     Restricted cash deposits                                    -         (12.6)
     Other                                                     2.5           (.2)
                                                      ------------  ------------ 
          Net cash used for  financing activities             (9.3)        (19.2)
                                                      ------------  ------------ 
NET DECREASE IN CASH AND CASH EQUIVALENTS                    (16.0)       (142.9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD             164.6         336.6 
                                                      ------------  ------------ 
CASH AND CASH EQUIVALENTS AT END OF PERIOD            $      148.6  $      193.7 
                                                      ============  ============ 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Interest paid, net of capitalized interest       $       79.5  $       72.8 
     Income taxes paid                                         6.5           2.1 


<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>

<PAGE>


                       MAXXAM INC. AND SUBSIDIARIES

            CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (IN MILLIONS OF DOLLARS, EXCEPT SHARE AMOUNTS)


1.        GENERAL

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

          The consolidated financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly
the consolidated financial position of the Company at March 31, 1998, the
consolidated results of operations for the three months ended March 31,
1998 and 1997 and consolidated cash flows for the three months ended March
31, 1998 and 1997.  Certain reclassifications of prior period information
have been made to conform to the current presentation.

          SFAS No. 130 was issued in June 1997 with the adoption required
for fiscal years beginning after December 31, 1997.  SFAS 130 requires the
presentation of an additional income measure (termed "comprehensive
income"), which adjusts traditional net income for certain items that
previously were only reflected as direct charges to equity (such as minimum
pension liabilities).  For the quarters ended March 31, 1998 and 1997 there
is not a significant difference between "traditional" net income and
comprehensive income as the amount of the adjustments required to arrive at
comprehensive income is not significant.

2.        INVENTORIES

          Inventories consist of the following:


<TABLE>
<CAPTION>

                                                   MARCH 31,    DECEMBER 31,
                                                      1998          1997
                                                 ------------- -------------
<S>                                              <C>           <C>
Aluminum Operations:
     Finished fabricated aluminum products       $       101.2 $       103.9
     Primary aluminum and work in process                181.9         226.6
     Bauxite and alumina                                 120.8         108.4
     Operating supplies and repair and
          maintenance parts                              124.2         129.4
                                                 ------------- -------------
                                                         528.1         568.3
                                                 ------------- -------------
Forest Products Operations:
     Lumber                                               49.0          49.7
     Logs                                                  7.0          11.6
                                                 ------------- -------------
                                                          56.0          61.3
                                                 ------------- -------------
                                                 $       584.1 $       629.6
                                                 ============= =============


</TABLE>

3.        RESTRICTED CASH

          Long-term receivables and other assets include restricted cash in
the amount of $32.7 and $33.7 at March 31, 1998 and December 31, 1997,
respectively.  Such restricted cash primarily represents the amount held by
the trustee under the indenture governing the Timber Notes.

4.        LONG-TERM DEBT

          Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                    MARCH 31,    DECEMBER 31,
                                                       1998          1997
                                                  ------------  ------------
<S>                                               <C>           <C>
12% MGHI Senior Secured Notes due August 1, 2003  $      130.0  $      130.0 
11-1/4% MGI Senior Secured Notes due August 1,
     2003                                                100.0         100.0 
12-1/4% MGI Senior Secured Discount Notes due
     August 1, 2003, net of discount                     120.9         117.3 
10-1/2% Pacific Lumber Senior Notes due March 1,
     2003                                                235.0         235.0 
Pacific Lumber Credit Agreement                            9.4           9.4 
7.95% Scotia Pacific Timber Collateralized Notes
     due July 20, 2015                                   309.2         320.0 
KACC Credit Agreement                                        -             - 
10-7/8% KACC Senior Notes due October 15, 2006,
     including premium                                   225.0         225.8 
9-7/8% KACC Senior Notes due February 15, 2002,
     net of discount                                     225.0         224.2 
12-3/4% KACC Senior Subordinated Notes due
     February 1, 2003                                    400.0         400.0 
Alpart CARIFA Loans                                       60.0          60.0 
Other aluminum operations debt                            60.6          61.6 
Other notes and contracts, primarily secured by
     receivables, buildings, real estate and
     equipment                                            35.3          36.1 
                                                  ------------- -------------
                                                       1,910.4       1,919.4 
          Less: current maturities                       (32.8)        (31.4)
                                                  ------------- -------------
                                                  $    1,877.6  $    1,888.0 
                                                  ============= =============


</TABLE>

5.        PER SHARE INFORMATION

          Basic earnings per share is calculated by dividing net income by
the weighted average number of common shares outstanding during the period
including the weighted average impact of the shares of common stock issued
and treasury stock acquired during the year from the date of issuance or
repurchase.  The weighted average common shares outstanding was 7,000,597
shares and 8,656,948 shares for the three months ended March 31, 1998 and
1997, respectively.

          Diluted earnings per share calculations also include the dilutive
effect of the Class A Preferred Stock which are convertible into Common
Stock as well as common and preferred stock options.  The weighted average
number of common and common equivalent shares was 7,797,515 shares and
9,427,584 shares for the three months ended March 31, 1998 and 1997,
respectively.

6.        CONTINGENCIES

          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 lawsuits under CERCLA
and, along with certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites listed on
the National Priorities List under CERCLA.

          Based on Kaiser's evaluation of these and other environmental
matters, Kaiser has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters.  At March 31, 1998, the balance of such accruals, which are
primarily included in noncurrent liabilities, was $29.8.

          These environmental accruals represent Kaiser's estimate of costs
reasonably expected to be incurred based on presently enacted laws and
regulations, currently available facts, existing technology and Kaiser's
assessment of the likely remediation action to be taken.  Kaiser expects
that these remediation actions will be taken over the next several years
and estimates that annual expenditures to be charged to these environmental
accruals will be approximately $2.0 to $9.0 for the years 1998 through 2002
and an aggregate of approximately $7.0 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.  Kaiser believes that it is reasonably possible
that costs associated with these environmental matters may exceed current
accruals by amounts that could range, in the aggregate, up to an estimated 
$18.0.  As the resolution of these matters is subject to further regulatory
review and approval, no specific assurances can be given as to when the
factors upon which a substantial portion of this estimate is based can be
expected to be resolved.  However, Kaiser is working to resolve these
matters.  Kaiser believes that KACC has insurance coverage available to
recover certain incurred and future environmental costs and is actively
pursuing claims in this regard.  However, no accruals have been made for
any such insurance recoveries, and no assurances can be given that Kaiser
will be successful in its attempt to recover incurred or future costs. 
While uncertainties are inherent in the final outcome of these
environmental matters, and it is impossible to determine the actual costs
that ultimately may be incurred, management believes that the resolution of
such uncertainties should not have a material adverse effect on the
Company's consolidated financial position, results of operations or
liquidity.

          Asbestos Contingencies
          KACC is a defendant in a number of lawsuits, some of which
involve claims of multiple persons, in which the plaintiffs allege that
certain of their injuries were caused by, among other things, exposure to
asbestos during, and as a result of, their employment or association with
KACC or exposure to products containing asbestos produced or sold by KACC. 
The lawsuits generally relate to products KACC has not manufactured for at
least 20 years.  At March 31, 1998, the number of claims pending was
approximately 81,500 compared to 77,400 at December 31, 1997.  During 1997,
approximately 15,600 of such claims were received and approximately 9,300
were settled or dismissed.  During the quarter ended March 31, 1998,
approximately 5,400 of such claims were received and 1,300 of such claims
were settled or dismissed.  However, the foregoing claim and settlement
figures as of and for the quarter ended March 31, 1998, do not reflect the
fact that as of March 31, 1998, KACC reached agreements under which the
Company will settle approximately 25,000 of the pending asbestos-related claims
over an extended period.

          Based on past experience and reasonably anticipated future
activity, Kaiser has established an accrual for estimated asbestos-related
costs for claims filed and estimated to be filed through 2008.  There are
inherent uncertainties involved in estimating asbestos-related costs and
KACC's actual costs could exceed these estimates.  Kaiser's accrual was
calculated based on the current and anticipated number of asbestos-related
claims, the prior timing and amounts of asbestos-related payments, and the
advice of Wharton, Levin, Ehrmantraut, Klein & Nash, P.A. with respect to
the current state of the law related to asbestos claims.  Accordingly, an
asbestos-related cost accrual of $155.6, before consideration of insurance
recoveries, is included primarily in other noncurrent liabilities at March
31, 1998.  While Kaiser does not believe there is a reasonable basis for
estimating such costs beyond 2008 and, accordingly, no accrual has been
recorded for such costs which may be incurred beyond 2008, there is a
reasonable possibility that such costs may continue beyond 2008, and such
costs may be substantial.  Kaiser estimates that annual future cash
payments in connection with such litigation will be approximately $13.0 to
$20.0 for each of the years 1998 through 2002, and an aggregate of
approximately $80.0 thereafter.

          Kaiser believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs.  Claims for
recovery from some of KACC's insurance carriers are currently subject to
pending litigation and other carriers have raised certain defenses, which
have resulted in delays in recovering costs from the insurance carriers. 
The timing and amount of ultimate recoveries from these insurance carriers
are dependent upon the resolution of these disputes.  Kaiser believes,
based on prior insurance-related recoveries with respect to asbestos-
related claims, existing insurance policies, and the advice of Thelen,
Marrin, Johnson & Bridges LLP with respect to applicable insurance coverage
law relating to the terms and conditions of these policies, that
substantial recoveries from the insurance carriers are probable. 
Accordingly, an estimated aggregate insurance recovery of $115.7,
determined on the same basis as the asbestos-related cost accrual, is
recorded primarily in long-term receivables and other assets at March 31,
1998.  During the first quarter of 1998, KACC reached agreements on
asbestos-related coverage matters with two insurance carriers under which
KACC collected a total of approximately $17.5 million.

          Kaiser continues to monitor claims activity, the status of
lawsuits (including settlement initiatives), legislative progress, and
costs incurred in order to ascertain whether an adjustment to the existing
accruals should be made to the extent that historical experience may differ
significantly from Kaiser's underlying assumptions. While uncertainties are
inherent in the final outcome of these asbestos matters and it is presently
impossible to determine the actual costs that ultimately may be incurred
and insurance recoveries that will be received, Kaiser currently 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.

          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.  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 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,
adjourned on December 19, 1997, and is scheduled to recommence on June 16,
1998.

          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 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 this contingency.  Accordingly, it is
impossible to assess the ultimate outcome of the foregoing matters or its
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.

     7.   DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

          At March 31, 1998, the net unrealized gain on KACC's position in
aluminum forward sales and option contracts, (based on an average price of
$1,643 per ton ($.75 per pound) of primary aluminum), natural gas, fuel oil
and diesel fuel forward purchase and option contracts, and forward foreign
exchange contracts, was approximately $11.5.  Any gain or losses on the
derivative contracts utilized in KACC's hedging activities are offset by
losses or gains, respectively, on the transactions being hedged.

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

          From time to time in the ordinary course of business, KACC enters
into hedging transactions to provide price risk management in respect of
the net exposure of earnings resulting from (i) anticipated sales of
alumina, primary aluminum and fabricated aluminum products, less (ii)
expected purchases of certain items, such as aluminum scrap, rolling ingot,
and bauxite, whose prices fluctuate with the price of primary aluminum. 
Forward sales contracts are used by KACC to effectively fix the price that
KACC will receive for its shipments.  KACC also uses option contracts (i)
to establish a minimum price for its product shipments, (ii) to establish a
"collar" or range of prices for KACC's anticipated sales, and/or (iii) to
permit KACC to realize possible upside price movements.  As of March 31,
1998, KACC had sold forward, at fixed prices, approximately 76,450, and
24,000 tons of primary aluminum with respect to 1998, and 1999,
respectively.  As of March 31, 1998, KACC had also purchased put options to
establish a minimum price for approximately 33,750 tons of primary aluminum
with respect to 1998 and had entered into option contracts that established
a price range for an additional 173,700, and 124,500 tons for 1998 and
1999, respectively.  Additionally, at March 31, 1998, KACC also held fixed
price purchase contracts for 79,800 tons of primary aluminum with respect
to 1998.

          As of March 31, 1998, KACC had sold forward virtually all of the
alumina available to it in excess of its projected internal smelting
requirements for 1998, 1999 and 2000 at prices indexed to future prices of
primary aluminum.

          Energy
          KACC is exposed to energy price risk from fluctuating prices for
fuel oil and natural gas consumed in the production process.  Accordingly,
KACC from time to time in the ordinary course of business enters into
hedging transactions with major suppliers of energy and energy related
financial instruments.  As of March 31, 1998, KACC had a combination of
fixed price purchase and option contracts for the purchase of approximately
45,000 MMBtu of natural gas per day during the remainder of 1998.  As of
March 31, 1998, KACC also held a combination of fixed price purchase and
option contracts for an average of 232,000 and 39,000 barrels per month of
fuel oil and diesel fuel for 1998 and 1999, respectively.

          Foreign Currency
          KACC enters into forward exchange contracts to hedge material
cash commitments to foreign subsidiaries or affiliates.  At March 31, 1998,
KACC had net forward foreign exchange contracts totaling approximately
$198.5 for the purchase of 277.0 Australian dollars from April 1998,
through December 2000, in respect of its commitments for 1998 and 1999
expenditures denominated in Australian dollars.

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 section contains statements which constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995.  These statements appear in several places in this Form
10-Q.  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 section 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 three 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 MAXXAM Property Company; and other commercial
operations through various other wholly owned subsidiaries.  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" 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 two business segments: bauxite and alumina,
and aluminum processing.  As an integrated aluminum producer, Kaiser uses a
portion of its bauxite, alumina and primary aluminum production for
additional processing at certain of its facilities.

          Recent Events and Developments
          During the quarter ended March 31, 1998, KACC reached agreements
to settle approximately 25,000 of the pending asbestos-related claims over
an extended period.  Also during the first quarter of 1998, KACC reached 
agreements on asbestos-related coverage matters with two insurance carriers 
under which Kaiser collected a total of approximately $17.5 million.  As the 
amounts related to the claim settlements and insurance recoveries were 
consistent with Kaiser's year-end 1997 accrual assumptions, these events are 
not expected to have a material impact on the Kaiser's financial position, 
results of operations, or liquidity.

          During April 1998, Kaiser's 90%-owned Valco smelter in Ghana
announced that it had reached an agreement with the VRA to receive
compensation in lieu of the power necessary to run an additional potline
that was curtailed on April 6, 1998.  The compensation is expected to
substantially mitigate the financial impact of the curtailment.  As a
result of the curtailment, Valco will be operating one if its five
potlines, as compared to 1997, when Valco operated four potlines.  Valco
had previously curtailed two of its potlines in 1998, one in January, for
which it received no compensation, and one in February, for which it will
be compensated.  As previously announced, Kaiser has notified the VRA that
it believes it had the contractual rights at the beginning of 1998 to
sufficient energy to run four and one-half potlines for the balance of the
year.  Valco continues to seek compensation from the VRA with respect to
the January 1998 reduction of 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 beyond
1998.  No assurances can be given as to the success of these discussions,
the possibility of requests from the VRA for additional curtailments, or as
to the operating level of Valco for the remainder of 1998 or beyond.

          Summary
          The following table presents selected operational and financial
information for the three months ended March 31, 1998 and 1997.  The
information presented in the table is in millions of dollars except
shipments and prices, and intracompany shipments have been excluded.

<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                               March 31,
                                                      --------------------------
                                                           1998          1997
                                                      ------------- ------------
<S>                                                   <C>           <C>
Shipments: (1)                                                                   
     Alumina                                                  424.6        385.5 
     Aluminum products:
          Primary aluminum                                     80.5         78.5 
          Fabricated aluminum products                        105.5         93.9 
                                                      ------------- ------------
               Total aluminum products                        186.0        172.4 
                                                      ============= ============
Average realized sales price:
     Alumina (per ton)                                $         201 $        190 
     Primary aluminum (per pound)                               .71          .75 
Net sales:
     Bauxite and alumina:
          Alumina                                     $        85.5 $       73.2 
          Other (2) (3)                                        25.7         26.6 
                                                      ------------- ------------ 
               Total bauxite and alumina                      111.2         99.8 
                                                      ------------- ------------ 
     Aluminum processing:
          Primary aluminum                                    126.2        129.2 
          Fabricated aluminum products                        356.9        314.4 
          Other (3)                                             2.7          4.0 
                                                      ------------- ------------ 
               Total aluminum processing                      485.8        447.6 
                                                      ------------- ------------- 
                    Total net sales                   $       597.0 $      547.4 
                                                      ============= ============ 

Operating income                                      $        46.3 $       32.8 
                                                      ============= ============
Income before income taxes and minority interests     $        19.0 $        7.9 
                                                      ============= ============ 

Capital expenditures                                  $        13.7 $       21.8 
                                                      ============= ============


<FN>

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

(1)  Shipments are expressed in thousands of metric tons.  A metric ton is
     equivalent to 2,204.6 pounds.
(2)  Includes net sales of bauxite.
(3)  Includes the portion of net sales attributable to minority interests
     in consolidated subsidiaries.

</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.  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.

          During 1997, the AMT Price for primary aluminum remained
relatively stable in the $.75 to $.80 per pound range through November and
then declined during December to the $.70 to $.75 per pound range.  During
the first three months of 1998, the AMT Price for primary aluminum was
generally in the $.68 to $.73 per pound range.  The AMT Price for primary
aluminum for the week ended April 17, 1998 was approximately $.70 per
pound.

          Net Sales - Bauxite and Alumina
          Net sales of alumina increased by 16% for the quarter ended March
31, 1998, from the comparable period in the prior year, as a result of a 6%
increase in average realized prices from the sale of alumina and a 10%
increase in alumina shipments.  The fluctuations in shipment volumes as
compared to the quarter ended March 31, 1997, was primarily attributable to
the timing of shipments.

          Net Sales - Aluminum Processing
          Net sales of primary aluminum for the quarter ended March 31,
1998, decreased by 2% from the comparable  prior year period as a result of
a 5% decrease in average realized prices, offset by a 3% increase in
shipments.  Net sales of fabricated aluminum products for the quarter ended
March 31, 1998, were up 14% as compared to the prior year period as a
result of a 12% increase in shipments and a 2% increase in average realized
prices.  The increase in fabricated aluminum product shipments over the
first quarter of 1997 was the result of Kaiser's June 1997 acquisition of
the Bellwood extrusion facility in Richmond, Virginia, as well as increased
shipments of heat-treat products.

          Operating Income
          Operating income increased as improvements in the average
realized price of alumina, improvements in the alumina, primary aluminum
and fabricated aluminum products operations and reduced power costs more
than offset the impact of the decline in the average realized price for
primary aluminum and the impacts of the Valco potline curtailments
discussed above.  The quarter-over-quarter improvement in the Company's
fabricated aluminum products operations reflect the impacts of the
Bellwood acquisition, continued demand for heat-treat products, and
an improvement in operating performance.  The impact of the Valco potline
curtailments was only partially reflected in operating results as one of
the potlines was curtailed after quarter-end and as the two lines curtailed
prior to March 31, 1998, operated for only part of the quarter.  Reduced
operating results attributable to such first quarter 1998 curtailments,
as well as incremental charges recorded in the quarter associated with
potline shut-down costs, were partially offset by compensation which will
be received over an 18-month period beginning in June 1998 for one of the
two lines curtailed during the quarter.  Operating income for the three
months ended March 31, 1997 included approximately $5.0 million related to
the settlement of certain energy service contracts.

     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 months ended March 31, 1998 and 1997.  The
information presented in the table is in millions of dollars except
shipments and prices.


<TABLE>
<CAPTION>

                                                         Three Months Ended
                                                             March 31,
                                                    ---------------------------
                                                         1998          1997
                                                    ------------  -------------
<S>                                                 <C>           <C>
Shipments:
     Lumber: (1)
          Redwood upper grades                              10.2           13.0
          Redwood common grades                             53.9           57.2
          Douglas-fir upper grades                           1.9            2.5
          Douglas-fir common grades                          9.2           19.4
          Other                                              2.5            3.9
                                                    ------------  -------------
               Total lumber                                 77.7           96.0
                                                    ============  =============
     Logs (2)                                                  -            2.5
                                                    ============  =============
     Wood chips (3)                                         32.2           60.2
                                                    ============  =============
Average sales price:
     Lumber: (4)
          Redwood upper grades                      $      1,491  $       1,322
          Redwood common grades                              506            505
          Douglas-fir upper grades                         1,269          1,211
          Douglas-fir common grades                          352            486
     Logs (4)                                                382            478
     Wood chips (5)                                           62             75

Net sales:
     Lumber, net of discount                        $       48.5  $        59.1
     Logs                                                      -            1.2
     Wood chips                                              2.0            4.5
     Cogeneration power                                       .6            1.0
     Other                                                    .8            1.0
                                                    ------------  -------------
               Total net sales                      $       51.9  $        66.8
                                                    ============  =============
Operating income                                    $       10.1  $        18.8
                                                    ============  =============
Operating cash flow (6)                             $       15.7  $        25.4
                                                    ============  =============
Income (loss) before income taxes                   $       (4.2) $          .3
                                                    ============  =============
Capital expenditures                                $        2.8  $         2.3
                                                    ============  =============


<FN>
---------------

(1)  Lumber shipments are expressed in millions of board feet.
(2)  Log shipments are expressed in millions of feet, net Scribner scale.
(3)  Wood chip shipments are expressed in thousands of bone dry units of
     2,400 pounds.
(4)  Dollars per thousand board feet.
(5)  Dollars per bone dry unit.
(6)  Operating income before depletion and depreciation, also referred to
     as "EBITDA."

</TABLE>


          Net sales
          Net sales for the quarter ended March 31, 1998 decreased from the
comparable prior year quarter due primarily to lower shipments of lumber,
logs, and chips and to lower average realized prices for common grade
Douglas-fir lumber.  This impact was partially offset by higher average
realized prices for upper and common grade redwood lumber.  The decrease in
volumes was due largely to well-above-normal rainfall during the 1998
period which reduced demand, hindered logging operations, slowed
production, and inhibited shipments.

          Operating income
          Operating income for the three months ended March 31, 1998
decreased from the comparable prior year period, principally due to the
decrease in net sales discussed above.

          Income (loss) before income taxes and minority interests
          Income (loss) before income taxes for the three months ended
March 31, 1998 decreased from the comparable 1997 period principally due to
lower operating income discussed above.  This impact was partially offset
by higher earnings on marketable securities and a gain on the sale of a
non-timber property.

     REAL ESTATE AND OTHER OPERATIONS

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

<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                               March 31,
                                                      --------------------------
                                                           1998          1997
                                                      ------------  ------------
                                                        (In millions of dollars)
<S>                                                   <C>           <C>
Net sales:
     Real estate                                      $        8.5          11.4 
     SHRP, Ltd.                                                6.6           6.0 
                                                      ------------  ------------ 
          Total net sales                             $       15.1  $       17.4 
                                                      ============  ============ 

Operating income (loss):
     Real estate                                      $       (2.5) $          - 
     SHRP, Ltd.                                                 .9            .4 
                                                      ------------  ------------ 
          Total operating income (loss)               $       (1.6) $         .4 
                                                      ============  ============ 

Income (loss) before income taxes and minority
     interests:
     Real estate                                      $        (.2) $        3.4 
     SHRP, Ltd.                                                 .2           (.3)
                                                      ------------  ------------ 
          Total income (loss) before income taxes
               and minority interests                 $          -           3.1 
                                                      ============  ============


</TABLE>

          Net sales
          Net sales decreased for the three months ended March 31, 1998
from the same period in 1997 primarily due to lower revenues from real
estate development and commercial operations, reflecting various asset
dispositions during the first quarter of 1997 and a 1997 bulk land sale at
the Fountain Hills, Arizona development.

          Operating loss
          The operating loss for the first quarter of 1998 was primarily
due to lower net sales discussed above.

          Income (loss) before income taxes and minority interests
          The decrease in income before income taxes and minority interests
for the three months ended March 31, 1998 compared to the same period in
1997 is primarily due to lower gains from RTC Portfolio sales, in addition
to the operating loss discussed above.

     OTHER ITEMS NOT DIRECTLY RELATED TO INDUSTRY SEGMENTS

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                                               March 31,
                                                      --------------------------
                                                           1998          1997
                                                      ------------  ------------
                                                        (In millions of dollars)
<S>                                                   <C>           <C>
Operating loss                                        $       (3.5) $       (3.0)
Loss before income taxes and minority interests               (5.8)         (4.5)


</TABLE>

          Operating loss
          The operating losses represent corporate general and
administrative expenses that are not allocated to the Company's industry
segments.  The operating loss for the first quarter of 1998 was
substantially unchanged from the same period in 1997.

          Loss before income taxes and minority interests
          The loss before income taxes and minority interests includes
operating losses, investment, interest and other income (expense) and
interest expense, including amortization of deferred financing costs, that
are not attributable to the Company's industry segments.  The losses for
the first quarter of 1998 increased from the same periods in 1997,
principally due to higher interest expense related to short-term
borrowings.

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

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

     PARENT COMPANY AND MGHI

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

          The various credit instruments of MGHI, KACC, MGI, Pacific Lumber
and Scotia Pacific contain various covenants which, among other things,
limit the ability of such entities to incur additional indebtedness and
liens, to engage in transactions with affiliates, to pay dividends and to
make investments.  As of March 31, 1998, $3.0 million of dividends could be
paid by MGHI and $2.6 million of dividends could be paid by MGI.  Pursuant
to the terms of the KACC Credit Agreement, Kaiser is prohibited from paying
any dividends with respect to its common stock.  The most restrictive
covenants governing debt of the Company's real estate and other
subsidiaries would not restrict payment to the Company of all nonrestricted
cash and unused borrowing availability for such subsidiaries (approximately
$11.6 million could be paid as of March 31, 1998).

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

          As of March 31, 1998, the Company (excluding its subsidiaries)
had cash and marketable securities of approximately $71.7 million and
available borrowings under the Custodial Trust Agreement and Salomon Smith
Barney facility of $47.5 million in aggregate.  The Company believes
that its existing resources, together with the cash available from
subsidiaries and other sources of financing, 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 substantially adverse outcome of
the litigation described in Note 6 to the Consolidated Financial Statements
could materially adversely affect the Company's consolidated financial
position, results of operations or liquidity.  See Note 6 to the
Consolidated Financial Statements for a discussion of the Company's
material contingencies.

     ALUMINUM OPERATIONS

          At March 31, 1998, Kaiser had long-term debt of $970.6 million,
compared with $971.7 million at December 31, 1997.

          At March 31, 1998, $272.1 million (of which $52.9 million could
have been used for letters of credit) was available to KACC under the KACC
Credit Agreement.  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.  During the three months ended
March 31, 1998, the average per annum interest rates on loans outstanding
under the KACC Credit Agreement were approximately 9%.

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

          Kaiser's capital expenditures during the three months ended March
31, 1998, were $13.7 million, and were used primarily to improve production
efficiency, reduce operating costs, expand capacity at existing facilities,
and construct new facilities.  Total consolidated capital expenditures (of
which approximately 8% is expected to be funded by Kaiser's minority
partners in certain foreign joint ventures) are expected to be between
$75.0 and $125.0 million per annum in each of 1998 through 2000.

          During the first quarter of 1998, the Micromill(TM) facility,
which was constructed in Nevada during 1996 as a demonstration and
production facility, delivered its first commercial product shipments to
customers, but the amount of such shipments was minimal.  Additional
product trials for international and domestic customers are ongoing and
Kaiser currently expects increased commercial deliveries from the facility
during the second quarter of 1998.  However, the Micromill(TM) technology
has not yet been fully implemented or commercialized and there can be no
assurances that full implementation or commercialization will be
successful.

          Management continues to evaluate numerous projects, including the
Micromill(TM) technology, all of which require substantial capital in both
the United States and overseas.

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

     FOREST PRODUCTS OPERATIONS

          As of March 31, 1998, $30.3 million of borrowings was available
under the Pacific Lumber Credit Agreement, of which $4.9 million was
available for letters of credit and $20.6 million was restricted to
timberland acquisitions.  As of March 31, 1998, $9.4 million of borrowings
were outstanding and letters of credit outstanding amounted to $15.1 million.

          MGI and its subsidiaries anticipate that cash from operations,
together with existing cash, cash equivalents, marketable securities and
available sources of financing, will be sufficient to fund their working
capital and capital expenditure requirements for the next year.  With
respect to their long-term liquidity, MGI and its subsidiaries believe
that their existing cash and cash equivalents, together with their ability
to generate sufficient levels of cash from operations and their ability to
obtain both short- and long-term financing, should provide sufficient funds
to meet their working capital and capital expenditure requirements.
However, due to their highly leveraged condition, MGI and its subsidiaries
(and in turn MGHI) are more sensitive than less leveraged companies to
factors affecting their operations, including litigation and governmental
regulation affecting their timber harvesting practices (see "--Trends"
below), increased competition from other lumber producers or alternative
building products and general economic conditions.

     REAL ESTATE AND OTHER OPERATIONS

          As of March 31, 1998, the Company's real estate and other
subsidiaries had approximately $9.4 million available for use under the
MCOP Credit Agreement.  The Company believes that the existing cash and
credit facilities of its real estate and other subsidiaries are sufficient
to fund the working capital and capital expenditure requirements of such
subsidiaries for the next year.  With respect to the long-term liquidity of
such subsidiaries, the Company believes that their ability to generate cash
from the sale of their existing real estate, together with their ability to
obtain financing, should provide sufficient funds to meet their working
capital and capital expenditure requirements.

TRENDS

     FOREST PRODUCTS OPERATIONS

          Pacific Lumber's business is subject to a variety of California
and federal laws and regulations dealing with timber harvesting, threatened
and endangered species and habitat for such species, and air and water
quality.  Compliance with such laws and regulations plays a significant
role in Pacific Lumber's business.  While compliance with such laws,
regulations and judicial and administrative interpretations, together with
the cost of litigation incurred in connection with certain timber
harvesting operations of Pacific Lumber, have increased the costs of
Pacific Lumber, they have not had a significant adverse effect on the
Company's financial position, results of operations or liquidity.  However,
these laws and related administrative actions and legal challenges have
severely restricted the ability of Pacific Lumber to harvest virgin old
growth timber, and to a lesser extent, residual old growth timber on its
timberlands.

          On September 28, 1996, the Pacific Lumber Parties entered into
the Headwaters Agreement with the United States and California which
provides 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 are owned by Salmon Creek, with the remaining acreage
being owned by Scotia Pacific (Pacific Lumber having harvesting rights on
approximately 300 of such acres).  The Headwaters Timberlands would be
transferred in exchange for (a) cash or other consideration from the United
States and California having an aggregate fair market value of $300
million, and (b) approximately 7,800 acres of timberlands to be acquired
from a third party.  As part of the Headwaters Agreement, the Pacific
Lumber Parties agreed to not enter the Headwaters Timberlands to conduct
any logging or salvage operations.

          Closing of the Headwaters Agreement is subject to various
conditions, including federal and California funding,  approval of an SYP,
approval of a Multi-Species HCP, issuance of the Permits and the issuance
of certain tax agreements satisfactory to the Pacific Lumber Parties.

          In November 1997, President Clinton signed an appropriations bill
which contains authorization for the expenditure of $250 million of federal
funds towards consummation of the Headwaters Agreement.  On February 27,
1998, Pacific Lumber, MAXXAM and various government agencies entered into
the HCP/SYP Agreement regarding certain understandings that they had
reached regarding the Multi-Species HCP, the Permits and the SYP.  The
HCP/SYP Agreement provides that the Permits and Multi-Species HCP would
have a term of 50 years, and would limit the activities which could be
conducted by Pacific Lumber in twelve forest groves to those which would
not be detrimental to marbled murrelet habitat.  These groves aggregate
approximately 8,000 acres and consist of substantial quantities of virgin
and residual old growth redwood and Douglas-fir timber. 

          The Company believes that the HCP/SYP Agreement is a favorable
development that enhances its position in connection with legal and
regulatory challenges to Pacific Lumber's THPs as well as the prospects
for consummation of the Headwaters Agreement, the approval of the
Multi-Species HCP and SYP and the issuance of the Permits.  Several
species, including the northern spotted owl, the marbled murrelet and the
coho salmon, have been listed as endangered or threatened under the ESA
and/or the CESA.  Pacific Lumber has developed federal and state northern
spotted owl management plans which permit harvesting activities to be
conducted so long as Pacific Lumber adheres to certain measures designed
to protect the northern spotted owl.  The potential impact of the listings
of the marbled murrelet and the coho salmon is more uncertain.  If the
Multi-Species HCP is approved, Pacific Lumber would be issued the Permits,
which would allow limited incidental "take" of listed species so long as
there was no "jeopardy" to the continued existence of the species and the
Multi-Species HCP would identify the measures to be instituted in order to
minimize and mitigate the anticipated level of take to the greatest extent
possible.  The Multi-Species HCP would not only provide for Pacific Lumber's
compliance with habitat requirements for currently listed species, it would
also provide greater certainty and protection for Pacific Lumber with regard
to identified species that may be listed in the future.  Pacific Lumber is
attempting to include in the Multi-Species HCP a resolution of the effect
of potential regulatory limits by the EPA on sedimentation, temperature
and other factors for seventeen northern California rivers and certain of
their tributaries, including rivers within Pacific Lumber's timberlands.
These limitations would be aimed at protecting water quality.

          Lawsuits are pending or threatened which seek to prevent Pacific
Lumber from implementing certain of its approved THPs or other operations.
While challenges with respect to Pacific Lumber's young growth timber have
historically been limited, a lawsuit relating to the coho salmon was
recently filed under the ESA which relates to a significant number of THPs
covering young growth timber of Pacific Lumber. While the Company expects
these environmentally focused objections and lawsuits to continue, it
believes that the HCP/SYP Agreement will enhance Pacific Lumber's position
in connection with these challenges.  The Company also believes that the
Multi-Species HCP would expedite the preparation and facilitate approval of
its THPs.

          The HCP/SYP Agreement also contains certain provisions relating
to the SYP.  The Company expects Pacific Lumber to propose an LTSY which is
approximately 10% less than Pacific Lumber's average timber harvest over
the last three years.  If the SYP is approved by the CDF, Pacific Lumber
will have complied with certain BOF regulations requiring that timber
companies project timber growth and harvest on their timberlands over a
100-year planning period and establish an LTSY harvest level.  The SYP must
demonstrate that the average annual harvest over any rolling ten-year
period will not exceed the LTSY harvest level and that Pacific Lumber's
projected timber inventory is capable of sustaining the LTSY harvest level
in the last decade of the 100-year planning period.  An approved  SYP is
expected to be valid for ten years, although it would be subject to review
after five years.  Thereafter,  revised SYPs will  be prepared every decade
that address the LTSY harvest level based upon reassessment of changes in
the resource base and other factors. 

          The final terms of the SYP, the Multi-Species HCP and the Permits
are subject to additional negotiation and agreement among the parties as
well as public review and comment.  While the parties are working
diligently to complete the Multi-Species HCP and the SYP as well as the
other closing conditions contained in the Headwaters Agreement, there can
be no assurance that the Headwaters Agreement will be consummated or that
an SYP, Multi-Species HCP or Permits acceptable to Pacific Lumber will be
approved.  If the Headwaters Agreement is not consummated and Pacific
Lumber is unable to harvest or is severely limited in harvesting on various
of its timberlands, it intends to continue and/or expand its takings
litigation seeking just compensation from the appropriate governmental
agencies on the grounds that such restrictions constitute an uncompensated
governmental taking of private property for public use.

          In the event that a Multi-Species HCP is not approved, Pacific
Lumber will not enjoy the benefits of a more streamlined THP preparation
and review process.  Furthermore, if a Multi-Species HCP acceptable to
Pacific Lumber is not approved, it is impossible for the Company to
determine the potential adverse effect of the listings of the marbled
murrelet and coho salmon or the EPA's potential regulatory limitations
on river sedimentation on the Company's financial position, results of
operations or liquidity until such time as the various regulatory and
legal issues are resolved; however, if Pacific Lumber is unable to harvest,
or is severely limited in harvesting, on significant amounts of its
timberlands, such effect could be materially adverse to the Company.

                        PART II.  OTHER INFORMATION

ITEM 1.        LEGAL PROCEEDINGS

          Reference is made to Item 3 of the Form 10-K for information
concerning material legal proceedings with respect to the Company.  No
material developments have occurred with respect to such legal proceedings
subsequent to the filing of the Form 10-K.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

A       EXHIBITS:

          10   Form of Deferred Fee Agreement between Kaiser, KACC, and
               directors of Kaiser and KACC (incorporated herein by reference
               to Exhibit 10 to Kaiser's Quarterly Report on Form 10-Q for
               the quarter ended March 31, 1998, File No. 1-9447)

         *11   Computation of Net Income Per Common and Common
               Equivalent Share

         *27.1 Financial Data Schedule for the quarter ended March 31, 1998

         *27.2 Restated Financial Data Schedule for the fiscal year ended
               December 31, 1996

         *27.3 Restated Financial Data Schedule for the fiscal year ended
               December 31, 1995

---------------
*Included with this filing

B       REPORTS ON FORM 8-K:

          None.

                                 SIGNATURE


          Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized, who has signed this report on
behalf of the Registrant and as the principal accounting officer of the
Registrant.


                                           MAXXAM INC.




Date:  May 1, 1998              By:    /S/ PAUL N. SCHWARTZ       
                                         Paul N. Schwartz
                                           President, 
                                   Chief Financial Officer and
                                             Director


Date:  May 1, 1998              By:  /S/ ELIZABETH D. BRUMLEY     
                                       Elizabeth D. Brumley
                                       Assistant Controller
                                  (Principal Accounting Officer)

<PAGE>

                                                                 APPENDIX A


                         GLOSSARY OF DEFINED TERMS


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

BOF:  California Board of Forestry

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

CDF:  California Department of Forestry

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

CESA:  California Endangered Species Act

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

Common Stock:  $.50 par value common stock of the Company

Company:  MAXXAM Inc.

Custodial Trust Agreement:  A loan and pledge agreement between the Company
and the Custodial Trust Company providing for up to $25.0 million in
borrowings

EPA:  Environmental Protection Agency

ESA:  The federal Endangered Species Act

FDIC:  Federal Deposit Insurance Corporation

FDIC action:  A civil 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

Federated:  Federated Development Company

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,
1997

HCP:  Habitat conservation plan

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

Headwaters Agreement:  The September 28, 1996 agreement between the Pacific
Lumber Parties, the United States and California which provides 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

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

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

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

LTSY:  Long-term sustained yield

MCOP Credit Agreement:  $14.0 million revolving credit facility between the
Company's real estate and other subsidiaries and a bank

MGHI:  MAXXAM Group Holdings Inc.

MGI:  MAXXAM Group Inc.

Multi-Species HCP:  The habitat conservation plan covering multiple species
contemplated by the Headwaters Agreement

NMFS:  National Marine Fisheries Service

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

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
$60,000,000, of which $20,000,000 may be used for standby letters of credit
and $30,000,000 is restricted to timberland acquisitions

Pacific Lumber Parties:  Pacific Lumber, including its subsidiaries and
affiliates, and MAXXAM

Permits:  The incidental take permits related to the Multi-Species HCP

RTC Portfolio:  A portfolio originally consisting of 27 parcels of income
producing real property and 28 loans purchased from the Resolution Trust
Corporation in June 1991

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

Scotia Pacific:  Scotia Pacific Holding Company, a wholly owned subsidiary
of Pacific Lumber

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

SHRP, Ltd.:  Sam Houston Race Park, Ltd., a 90.5%-owned subsidiary of
MAXXAM

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:  The 7.95% Scotia Pacific Timber Collateralized Notes due
July 20, 2015

UFG:  United Financial Group, Inc.

USAT:  United Savings Association of Texas

USFWS:  United States Fish and Wildlife Service

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

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