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 SEPTEMBER 30, 1996

                       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 November 1, 1996:  
                              8,684,673

                                MAXXAM INC.

                                   INDEX


PART I. - FINANCIAL INFORMATION                                       PAGE

     Item 1.   Financial Statements

          Consolidated Balance Sheet at September 30, 1996 and
               December 31, 1995                                      3
          Consolidated Statement of Operations for the three and
               nine months ended September  30, 1996 and 1995         4
          Consolidated Statement of Cash Flows for the nine months
               ended September 30, 1996 and 1995                      5
          Condensed Notes to Consolidated Financial Statements        6

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations                    14

PART II. - OTHER INFORMATION

     Item 1.   Legal Proceedings                                      26
     Item 6.   Exhibits and Reports on Form 8-K                       28
     Signatures                                                       S-1

                        MAXXAM INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEET

<TABLE>

<CAPTION>

                                                 September 30,   December 31,
                                                      1996           1995     
                                                 -------------  -------------
                                                  (Unaudited)
                                                   (IN MILLIONS OF DOLLARS)
<S>                                              <C>            <C>
                     ASSETS
Current assets:
     Cash and cash equivalents                   $       120.5  $      104.2 
     Marketable securities                                50.6          45.9 
     Receivables:
          Trade, net of allowance for doubtful
               accounts of $5.8 and $5.5 at
               September 30, 1996 and December 31,
               1995, respectively                        220.8         246.2 
          Other                                           67.8          98.9 
     Inventories                                         623.6         606.8 
     Prepaid expenses and other current assets           156.5         129.7 
                                                 -------------  ------------
               Total current assets                    1,239.8       1,231.7 
Property, plant and equipment, net of
     accumulated depreciation of $750.6 and
     $678.1 at September 30, 1996 and December
     31, 1995, respectively                            1,252.4       1,231.9 
Timber and timberlands, net of depletion of
     $151.3 and $139.6 at September 30, 1996
     and December 31, 1995, respectively                 303.0         313.0 
Investments in and advances to unconsolidated
     affiliates                                          186.3         189.1 
Deferred income taxes                                    435.5         414.0 
Long-term receivables and other assets                   466.1         452.6 
                                                 -------------  ------------
                                                 $     3,883.1  $    3,832.3 
                                                 =============  ============
     LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable                            $       170.7  $      196.7 
     Accrued interest                                     24.8          58.0 
     Accrued compensation and related benefits           126.2         166.5 
     Other accrued liabilities                           170.6         148.4 
     Payable to affiliates                                96.6          90.2 
     Long-term debt, current maturities                   26.4          25.1 
                                                 -------------  ------------
               Total current liabilities                 615.3         684.9 
Long-term debt, less current maturities                1,683.9       1,585.1 
Accrued postretirement benefits                          736.7         742.6 
Other noncurrent liabilities                             684.5         680.3 
                                                 -------------  ------------
               Total liabilities                       3,720.4       3,692.9 
                                                 -------------  ------------
Commitments and contingencies

Minority interests                                       217.9         223.2 
Stockholders' deficit:
     Preferred stock, $.50 par value;
          12,500,000 shares authorized; Class A
          $.05 Non-Cumulative Participating
          Convertible Preferred Stock; shares
          issued: 669,701                                   .3            .3 
     Common stock, $.50 par value; 28,000,000
          shares authorized; shares issued:
          10,063,685                                       5.0           5.0 
     Additional capital                                  155.6         155.0 
     Accumulated deficit                                (180.5)       (208.5)
     Pension liability adjustment                        (16.1)        (16.1)
     Treasury stock, at cost (shares held:
          preferred - 845; common - 1,355,512)           (19.5)        (19.5)
                                                 -------------  ------------
               Total stockholders' deficit               (55.2)        (83.8)
                                                 -------------  ------------
                                                 $     3,883.1  $    3,832.3 
                                                 =============  ============

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

</TABLE>

                                MAXXAM INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENT OF OPERATIONS
                                         (UNAUDITED)

<TABLE>

<CAPTION>

                                         Three Months Ended           Nine Months Ended
                                            September 30,               September 30,       
                                     -------------------------   --------------------------
                                         1996          1995          1996          1995    
                                     ------------  ------------  ------------  ------------
                                         (In millions of dollars, except share amounts)
<S>                                  <C>           <C>           <C>           <C>
Net sales:
     Aluminum operations             $      553.4  $     550.3   $    1,652.1  $   1,646.7  
     Forest products operations              68.5         63.3          199.6        180.9  
     Real estate and other
          operations                         19.3         24.4           69.4         65.0  
                                     ------------  ------------  ------------  ------------
                                            641.2        638.0        1,921.1      1,892.6  
                                     ------------  ------------  ------------  ------------

Costs and expenses:
     Costs of sales and operations
          (exclusive of depreciation
          and depletion):
          Aluminum operations               485.0        439.3        1,394.8      1,329.8  
          Forest products operations         40.1         33.5          114.6         96.0  
          Real estate and other
               operations                    16.8         20.0           57.1         48.4  
     Selling, general and
          administrative expenses            58.7         50.7          152.9        140.5  
     Depreciation and depletion              31.0         30.1           92.9         91.0  
                                     ------------  ------------  ------------  ------------
                                            631.6        573.6        1,812.3      1,705.7  
                                     ------------  ------------  ------------  ------------

Operating income                              9.6         64.4          108.8        186.9  

Other income (expense):
     Investment, interest and other
          income (expense)                   19.6          (.4)          35.1          8.7  
     Interest expense                       (44.8)       (45.3)        (135.5)      (136.1) 
                                     ------------  ------------  ------------  ------------
Income (loss) before income taxes
     and minority interests                 (15.6)        18.7            8.4         59.5  

Credit (provision) for income taxes          23.0         (1.8)          27.1         (4.6) 
Minority interests                           (2.1)        (6.2)          (7.5)       (19.8) 
                                     ------------  ------------  ------------  ------------

Net income                           $        5.3  $      10.7   $       28.0  $      35.1  
                                     ============  ============  ============  ============


Net income per common and common
     equivalent share                $        .56  $      1.13   $       2.96  $      3.71  
                                     ============  ============  ============  ============


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

</TABLE>

                            MAXXAM INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENT OF CASH FLOWS
                                    (UNAUDITED)


<TABLE>

<CAPTION>


                                                      Nine Months Ended
                                                        September 30,       
                                                 --------------------------
                                                     1996          1995    
                                                 ------------  ------------
                                                  (In millions of dollars)
<S>                                              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income                                  $       28.0  $       35.1 
     Adjustments to reconcile net income to net
          cash provided by operating
          activities:
          Depreciation and depletion                     92.9          91.0 
          Net sales of marketable securities              1.0           8.9 
          Minority interests                              7.5          19.8 
          Amortization of deferred financing
               costs and discounts on long-term
               debt                                      15.9          14.3 
          Amortization of excess investment
               over equity in net assets of
               unconsolidated affiliates                  9.1           8.7 
          Equity in income of unconsolidated
               affiliates                                (7.5)        (17.1)
          Net gain on sale of real estate,
               mortgage loans and other assets          (17.4)         (3.8)
          Decrease (increase) in receivables             57.1         (72.9)
          Increase (decrease) in payable to
               affiliates and other liabilities         (40.5)          9.0 
          Increase in inventories                       (18.2)        (68.6)
          Decrease in accrued interest                  (31.2)        (33.1)
          Decrease (increase) in prepaid
               expenses and other assets                (27.4)         82.9 
          Decrease in accounts payable                  (25.9)         (4.8)
          Increase in accrued and deferred
               income taxes                             (25.9)        (11.1)
          Other                                          (4.0)         (5.3)
                                                 ------------  ------------
               Net cash provided by operating
                    activities                           13.5          53.0 
                                                 ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Net proceeds from disposition of property
          and investments                                35.0          24.8 
     Capital expenditures                              (108.0)        (54.9)
     Other                                               (2.4)         (9.6)
                                                 ------------  ------------
               Net cash used for investing
                    activities                          (75.4)        (39.7)
                                                 ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings under revolving credit
          agreements                                    117.3          53.0 
     Proceeds from issuance of long-term debt             4.3           7.2 
     Principal payments on long-term debt               (32.6)        (35.3)
     Dividends paid to Kaiser's minority
          preferred stockholders                         (8.4)        (18.4)
     Redemption of preference stock                      (5.2)         (8.8)
     Other                                                2.8           4.6 
                                                 ------------  ------------
               Net cash provided by financing
                    activities                           78.2           2.3 
                                                 ------------  ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                16.3          15.6 
CASH AND CASH EQUIVALENTS AT BEGINNING OF
     PERIOD                                             104.2          84.6 
                                                 ------------  ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD       $      120.5  $      100.2 
                                                 ============  ============
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING
     AND FINANCING ACTIVITIES:
     Net repayments of margin borrowings for
          marketable securities                  $          -  $        6.9 
    Reduction of stockholders' deficit due to
          redemption of Kaiser preferred stock   $          -  $      134.3 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION:
     Interest paid, net of capitalized interest  $      150.9  $      154.8 
     Income taxes paid                                   21.7          21.4 

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

</TABLE>

                      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 Annual Report on Form 10-K filed by MAXXAM Inc.
with the Securities and Exchange Commission for the fiscal year ended
December 31, 1995 (the "Form 10-K").  All references to the "Company"
include MAXXAM Inc. and its subsidiary companies unless otherwise noted or
the context indicates otherwise.  Any capitalized terms used but not
defined in the following Condensed Notes to the Consolidated Financial
Statements have the same meaning given to them as in the Form 10-K. 
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 September 30, 1996,
the consolidated results of operations for the three and nine months ended
September 30, 1996 and 1995 and consolidated cash flows for the nine months
ended September 30, 1996 and 1995.  Certain reclassifications of prior
period information have been made to conform to the current presentation.

2.        RESTRICTED CASH

          Long-term receivables and other assets, as reflected on the
accompanying consolidated balance sheet, includes restricted cash in the
amount of $30.5 and $31.4 at September 30, 1996 and December 31, 1995,
respectively.  Such restricted cash represents the amount deposited into an
account held by the Trustee under the indenture governing the Timber Notes
of the Company's indirect wholly owned subsidiary, Scotia Pacific Holding
Company ("Scotia Pacific").

          At September 30, 1996 and December 31, 1995, cash and cash
equivalents also includes $5.7 and $19.7, respectively, which is restricted
for debt service payments on the succeeding note payment date for the
Timber Notes.

3.        INVENTORIES

          Inventories consist of the following:


<TABLE>

<CAPTION>


                                                September 30,  December 31,
                                                    1996           1995     
                                                ------------   -------------
<S>                                            <C>            <C>
Aluminum Operations:
    Finished fabricated products               $       108.4  $        91.5
    Primary aluminum and work in process               190.0          195.9
    Bauxite and alumina                                122.5          119.6
    Operating supplies and repair and
         maintenance parts                             124.6          118.7
                                               -------------  -------------
                                                       545.5          525.7
                                               -------------  -------------
Forest Products Operations:
    Lumber                                              58.8           65.5
    Logs                                                19.3           15.6
                                               -------------  -------------
                                                        78.1           81.1
                                               -------------  -------------
                                               $       623.6  $       606.8
                                               =============  =============
</TABLE>


4.       LONG-TERM DEBT

         Long-term debt consists of the following:

<TABLE>

<CAPTION>

                                           September 30,  December 31,
                                               1996           1995    
                                           ------------   ------------
<S>                                        <C>            <C>
Corporate:
    14% MAXXAM Senior Subordinated Reset
         Notes due May 20, 2000            $       25.0   $      25.0 
    12-1/2% MAXXAM Subordinated Debentures
         due December 15, 1999, net of
         discount                                  16.7          16.5 
    Other                                             -            .1 
Aluminum Operations:
    1994 KACC Credit Agreement                    131.2          13.1 
    9-7/8% KACC Senior Notes due February
         15, 2002, net of discount                224.0         223.8 
    Alpart CARIFA Loan                             60.0          60.0 
    12-3/4% KACC Senior Subordinated Notes
         due February 1, 2003                     400.0         400.0 
    Other                                          52.1          61.2 
Forest Products Operations:
    7.95% Scotia Pacific Timber
         Collateralized Notes due July 20,
         2015                                     336.1         350.2 
    10-1/2% Pacific Lumber Senior Notes
         due March 1, 2003                        235.0         235.0 
    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                                 101.0          92.5 
    Other                                            .8            .8 
Real Estate and Other Operations:
    11% SHRP, Ltd. Senior Secured
         Extendible Notes due September 1,
         2001, net of discount                     15.6          13.3 
    RTC Portfolio secured notes due
         December 31, 1999, interest at
         prime plus 3%                              3.8           8.0 
    Other notes and contracts, secured by
         receivables, buildings, real
         estate and equipment                       9.0          10.7 
                                           -------------  ------------
                                                1,710.3       1,610.2 
Less: current maturities                          (26.4)        (25.1)
                                           -------------  ------------
                                           $    1,683.9   $   1,585.1 
                                           =============  ============

</TABLE>

          On April 24, 1996, the Securities and Exchange Commission ("SEC")
declared effective a shelf registration statement which the Company had
filed with respect to up to $200.0 aggregate principal amount of debt
securities.  The Company has not determined the amount, interest rates,
maturity, collateral (if any) or other terms of such debt securities or the
timing of any offering of such debt securities.  The debt securities could
be secured by, or convertible into, shares of common stock of Kaiser
Aluminum Corporation ("Kaiser," a majority-owned subsidiary of the Company)
owned by the Company.  In that regard, Kaiser also filed a shelf
registration statement with the SEC, which was also declared effective on
April 24, 1996, covering 10 million shares of its common stock owned by the
Company.  The Company would use the net proceeds (or portions thereof) from
the sale of such debt securities to retire outstanding debt, for working
capital and general corporate purposes.

          Subsequent Event - Kaiser Offering of 10-7/8% Senior Notes
          On October 23, 1996, (the "Issuance Date"), KACC completed an
offering (the "Offering") of $175.0 principal amount of 10-7/8% Senior
Notes due 2006 (the "10-7/8% Senior Notes") at 99.5% of their principal
amount to yield 10.96% at maturity.  The 10-7/8% Senior Notes rank pari
passu with outstanding indebtedness under KACC's credit agreement dated
as of February 15, 1994, as amended (the "1994 KACC Credit Agreement")
and KACC's 9-7/8% Senior Notes due 2002 (the "Senior Notes") in right and
priority of payment and are guaranteed on a senior, unsecured basis by
certain of Kaiser's subsidiaries (the "Subsidiary Guarantors").  Net
proceeds from the Offering on the Issuance Date, after estimated expenses,
were approximately $168.9, of which $91.7 were utilized to reduce the
outstanding borrowings under the revolving credit facility of the 1994
KACC Credit Agreement to zero.  The remaining net proceeds (approximately
$77.2) were invested in short-term investments pending their application
for working capital and general corporate purposes, including capital
projects.

          On a pro forma basis, at September 30, 1996, after giving effect
to the Offering and the application of proceeds therefrom, the Company's
total consolidated indebtedness would have increased from $1,710.3 to
$1,753.2, borrowing capacity of $273.1 would have been available for use
under the 1994 KACC Credit Agreement and the Company would have had
available additional cash proceeds from the Offering of $37.7.

          During October 1996, the 1994 KACC Credit Agreement was amended
to, among other things, provide  for the Offering of the 10-7/8% Senior
Notes discussed above and to modify certain of the financial covenants 
contained in the 1994 KACC Credit Agreement.

5.       PER SHARE INFORMATION

          Per share calculations are based on the weighted average number
of common shares outstanding in each period and, if dilutive, weighted
average common equivalent shares assumed to be issued from the exercise of
common stock options based upon the average price of the Company's common
stock during the period.

6.       CREDIT (PROVISION) FOR INCOME TAXES

          The Company's credit (provision) for income taxes differs from
the federal statutory rate due principally to (i) the revision of prior
years' tax estimates and other changes in valuation allowances, (ii)
percentage depletion, and (iii) foreign, state and local taxes, net of
related federal tax benefits.  Revision of prior years' tax estimates
includes amounts for the reversal of reserves which the Company no longer
believes are necessary.  Generally, the reversal of reserves relate to the
expiration of the relevant statute of limitations with respect to certain
income tax returns, or the resolution of specific income tax matters with
the relevant tax authorities. The credit for income taxes for the third
quarter and nine months ended September 30, 1996 includes a benefit of
$17.0 and $30.4, respectively, relating to the reversal of reserves the
Company no longer believes are necessary.  The Company's provision for
income taxes for the third quarter and nine months ended September 30,
1995, reflects a benefit of $4.9 and $17.7, respectively, relating to the
reversal of reserves the Company no longer believes are necessary.

7.       CONTINGENCIES

          Environmental Contingencies
          Kaiser and its principal operating subsidiary, Kaiser Aluminum &
Chemical Corporation ("KACC"), are subject to a number of environmental
laws and regulations, to fines or penalties assessed for alleged breaches
of the environmental laws, and to claims and litigation based on such laws. 
KACC is currently subject to a number of lawsuits under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments Reauthorization Act of 1986 ("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 September 30, 1996, the balance of such accruals, which is
primarily included in other noncurrent liabilities, was $32.9.  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 $10.0 for the years 1996 through 2000 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
$26.5 and that the factors upon which a substantial portion of this
estimate is based are expected to be resolved in early 1997.  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 substantial 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 15 years.  At September 30, 1996, the number of such lawsuits
pending was approximately 75,900, as compared to 59,700 at December 31,
1995.  In 1995, approximately 41,700 of such claims were received and
approximately 7,200 were settled or dismissed.  During the first nine
months of 1996, approximately 20,000 of such claims were received and
approximately 3,800 were settled or dismissed.

          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 and settled through 2008. 
There are inherent uncertainties involved in estimating asbestos-related
costs, and Kaiser'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 estimated asbestos-related cost accrual of $160.0 before
consideration of insurance recoveries, is included primarily in other
noncurrent liabilities at September 30, 1996.  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 1996 through 2000, and
an aggregate of approximately $78.0 thereafter through 2008.  While Kaiser
does not believe there is a reasonable basis for estimating such costs
beyond 2008, and, accordingly, did not accrue such costs, there is a
reasonable possibility that such costs may continue beyond 2008, and that
such costs may be substantial.

          A substantial portion of the asbestos-related claims that were
filed and served on KACC during 1995 and the first nine months of 1996 were
filed in Texas.  KACC has been advised by its regional counsel that,
although there can be no assurance, the increase in pending claims may have
been attributable in part to tort reform legislation in Texas.  Although
asbestos-related claims are currently exempt from certain aspects of the
Texas tort reform legislation, management has been advised that efforts to
remove the asbestos-related exemption in the tort reform legislation
relating to the doctrine of forum non conveniens, as well as other
developments in the legislative and legal environment in Texas, may be
responsible for the accelerated pace of new claims experienced in late 1995
and its continuance through the first nine months of 1996, albeit at a
somewhat reduced rate.

          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 with respect to applicable insurance coverage law
relating to the terms and conditions of those policies, that substantial
recoveries from the insurance carriers are probable.  Accordingly, an
estimated aggregate insurance recovery of $142.3, determined on the same
basis as the asbestos-related cost accrual, is recorded primarily in long-
term receivables and other assets at September 30, 1996.

          Management continues to monitor claims activity, the status of
the 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
impossible to determine the actual costs that ultimately may be incurred
and the insurance recoveries that will be received, management believes
that, based on the factors discussed in the preceding paragraphs, the
resolution of the 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 United States Department of Treasury's
Office of Thrift Supervision ("OTS") initiated formal administrative
proceedings against the Company and others by filing a Notice of Charges
(the "Notice").  The Notice alleges misconduct by the Company, Federated
Development Company ("Federated," a New York business trust wholly owned by
Mr. Charles E. Hurwitz, members of his immediate family and trusts for the
benefit thereof), Mr. Hurwitz and others (the "Respondents") with respect
to the failure of United Savings Association of Texas ("USAT"), a wholly
owned subsidiary of United Financial Group Inc. ("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 $138.0 from the Company, civil money
penalties and a removal from, and prohibition against the Company and the
other Respondents engaging in, the banking industry.  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 impact, if any, of the
outcome this matter may have on the Company's consolidated financial
position, results of operations or liquidity.

          On August 2, 1995, the Federal Deposit Insurance Corporation
("FDIC") filed a civil action entitled Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund v. Charles E. Hurwitz
(No. H-95-3936) (the "FDIC action") in the U.S. District Court for the
Southern District of Texas (the "Court").  The FDIC action did not name the
Company as a defendant.  The suit against Mr. Hurwitz seeks 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 FDIC
further alleges, among other things, that Mr. Hurwitz was obligated to
ensure that UFG, Federated and the Company maintained the net worth of
USAT.  On November 14, 1995, Mr. Hurwitz filed a motion to join the OTS to
this action.  On December 8, 1995, the Company filed a motion to intervene
in this action and conditioned it on the Court joining the OTS to this
action.  The Company also filed a proposed complaint with its motion to
intervene which alleges that the OTS violated the Administrative Procedures
Act by rejecting the Company's bid for USAT.  The court has scheduled a
pre-trial conference for November 19, 1996.  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.  It is
impossible to assess the ultimate outcome of the foregoing matter or its
potential impact on the Company's consolidated financial position, results
of operations or liquidity.

          Other Contingencies
          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
impossible to determine the actual costs that ultimately may be incurred,
management currently 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.       HEADWATERS AGREEMENT

          On September 28, 1996, the Company and Pacific Lumber (the
"Pacific Lumber Parties") entered into an agreement (the "Headwaters
Agreement") which provides the framework for the acquisition by the United
States and California of approximately 5,600 acres of Pacific Lumber's
timberlands commonly referred to as the Headwaters Forest and the Elk Head
Springs Forest (the "Headwaters Timberlands").  The Headwaters Timberlands
would be transferred in exchange for (a) property and consideration
(including cash) from the United States and California having an aggregate
fair market value of $300 million and (b) approximately 7,775 acres of
adjacent timberlands to be acquired by the United States and California
(the "Elk River Timberlands").  The Pacific Lumber Parties  have agreed
not to conduct logging operations (including salvage logging) on the
Headwaters Timberlands while the Headwaters Agreement is in effect.  The
continuing effectiveness of the Headwaters Agreement is predicated on the
satisfaction of various conditions, including completion within ten months
of specified closing items.

          The Headwaters Agreement also provides, among other things, for
expedited processing by the United States of an incidental take permit
("Permit") to be based upon the Multi-Species HCP covering all of Pacific
Lumber's existing timber properties and any timber properties acquired as a
result of the Headwaters Agreement.  The agreement also requires expedited
processing by California of an SYP.  Closing of the Headwaters Agreement is
subject to various conditions, including (a) acquisition by the government
of the Elk River Timberlands from a third party, (b) approval of an SYP and
a Multi-Species HCP, and issuance of a Permit, each in form and substance
satisfactory to Pacific Lumber, (c) the issuance by the Internal Revenue
Service and the California Franchise Tax Board of closing agreements in
form and substance sought by and satisfactory to the Pacific Lumber
Parties, (d) the absence of a judicial decision in any litigation brought
by third parties that any party reasonably believes will significantly
delay or impair the transactions described in the Headwaters Agreement, and
(e) the dismissal with prejudice at closing of the Takings Litigation.

9.       DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

          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.  KACC
enters into primary aluminum hedging transactions from time to time in the
normal course of business.  Primary aluminum hedging transactions are
designed to mitigate Kaiser's exposure to declines in the market price of
primary aluminum, while retaining the ability to participate in favorable
environments that may materialize.  KACC has employed strategies which
include forward sales and purchases of primary aluminum at fixed prices and
the purchase or sale of options for primary aluminum.  At September 30,
1996, KACC had sold forward, at fixed prices, approximately 69,000 and
93,600 tons (all references to tons in this report refer to metric tons of
2,204.6 pounds) of primary aluminum in excess of its projected internal
fabrication requirements for 1997 and 1998, respectively, and had purchased
put options to establish a minimum price for 66,000 and 45,000 tons of such
1997 and 1998 surplus, respectively.  During October, 1996, KACC purchased
put options to establish a minimum price for an additional 126,000 tons of
primary aluminum in excess of its projected 1997 internal fabrication
requirements and entered into options contracts that established a price
range for an additional 48,000 tons of Kaiser's 1998 surplus.

          In addition, at September 30, 1996, KACC had sold forward
approximately 73% and 85% of the alumina available to it in excess of its
projected internal smelting requirements for 1997 and 1998, respectively. 
Virtually all of such 1997 and 1998 sales were made at prices indexed to
future prices of primary aluminum.

          From time to time, KACC also enters into forward purchase and
option transactions to limit its exposure to increases in natural gas and
fuel oil costs.  As of September 30, 1996, KACC had option contracts for
the purchase of approximately 40,000 MMBtu of gas per day during the first
quarter of 1997, and a combination of fixed price purchase and option
contracts for 20,000 MMBtu of natural gas per day for the period April 1997
to December 1998.  At September 30, 1996, KACC also held option contracts
for 54,000 barrels of fuel oil per month for the period January 1997
through December 1998.

          KACC also enters into hedging transactions in the normal course
of business that are designed to reduce its exposure to fluctuations in
foreign exchange rates.  At September 30, 1996, KACC had net forward
foreign exchange contracts totaling approximately $81.6 for the purchase of
110.0 Australian dollars from January 1997 through June 1998, in respect of
its commitments for 1997 and 1998 expenditures denominated in Australian
dollars.

          At September 30, 1996, the net unrealized gain on KACC's position
in aluminum forward sales and option contracts, based on an average price
of $1,481 per ton ($.67 per pound) of primary aluminum, natural gas and
fuel oil forward purchase and option contracts, and forward foreign
exchange contracts was approximately $46.4.

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 have the same meaning
given to them in the Form 10-K.

          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 various places in this section
and include statements regarding the intent, belief or current expectations
of the Company, its directors or its officers primarily with respect to the
future operating performance of the Company.  Readers are cautioned that
any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results
may differ materially from those in the forward looking statements as a
result of various factors.  This section identifies important factors that
could cause such differences.

RESULTS OF OPERATIONS

          The Company operates in three principal industries: aluminum,
through its majority owned subsidiary Kaiser, a fully integrated aluminum
producer; forest products, through MAXXAM Group Inc. ("MGI") and its wholly
owned subsidiaries, principally The Pacific Lumber Company ("Pacific
Lumber") and Britt Lumber Co., Inc.; real estate investment and
development, managed through MAXXAM Property Company; and other commercial
operations through various other wholly owned subsidiaries.

     ALUMINUM OPERATIONS

          Aluminum operations account for a substantial portion of the
Company's revenues and operating results.  Kaiser's operating results are
sensitive to changes in 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 and on hedging strategies.  Kaiser, through
its principal subsidiary KACC, operates in two business segments: bauxite
and alumina, and aluminum processing.  The following table presents
selected operational and financial information for the three and nine
months ended September 30, 1996 and 1995.  The information presented in the
table is in millions of dollars except shipments and prices.

<TABLE>

<CAPTION>


                                        Three Months Ended          Nine Months Ended
                                          September 30,               September 30,       
                                    --------------------------  --------------------------
                                        1996          1995          1996          1995    
                                    -----------   ------------  ------------  ------------
<S>                                 <C>           <C>           <C>           <C>
Shipments: (1)
    Alumina                               598.6          471.5       1,506.7      1,494.6 
    Aluminum products:
         Primary aluminum                  88.1           73.0         262.9        184.5 
         Fabricated aluminum
              products                     83.1           90.4         245.4        284.3 
                                    -----------   ------------  ------------  -----------
              Total aluminum
                   products               171.2          163.4         508.3        468.8 
                                    ===========   ============  ============  ===========

Average realized sales price:
    Alumina (per ton)               $       187   $        206  $        199  $       203 
    Primary aluminum (per pound)            .67            .83           .69          .82 

Net sales:
    Bauxite and alumina:
         Alumina                    $     111.7   $       97.2  $      300.2  $     303.8 
         Other (2) (3)                     25.8           22.3          77.2         65.3 
                                    -----------   ------------  ------------  -----------
              Total bauxite and
                   alumina                137.5          119.5         377.4        369.1 
                                    -----------   ------------  ------------  -----------
    Aluminum processing:
         Primary aluminum                 130.6          133.4         402.8        335.0 
         Fabricated aluminum
              products                    282.4          293.0         861.4        929.0 
         Other (3)                          2.9            4.4          10.5         13.6 
                                    -----------   ------------  ------------  -----------
              Total aluminum
                   processing             415.9          430.8       1,274.7      1,277.6 
                                    -----------   ------------  ------------  -----------
                   Total net sales  $     553.4   $      550.3  $    1,652.1  $   1,646.7 
                                    ===========   ============  ============  ===========

Operating income                    $      12.0   $       54.8  $       91.9  $     153.9 
                                    ===========   ============  ============  ===========

Income (loss) before income taxes
    and minority interests          $      (8.5)  $       23.1  $       26.6  $      73.0 
                                   ============  ============  ============  ===========

Capital expenditures and
    investments in unconsolidated
    affiliates                      $      39.2   $       26.1  $       91.1  $      53.2 
                                   ============   ============  ============  ===========

<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>

          Summary
          Kaiser had operating income of $12.0 million for the third
quarter of 1996, compared to operating income of $54.8 million for the same
period of 1995.  Net sales in the third quarter of 1996 totaled $553.4
million compared to $550.3 million in the third quarter of 1995.  For the
first nine months of 1996, Kaiser's operating income was $91.9 million,
compared to operating income of $153.9 million in the first nine months of
1995.  Net sales for the first nine months of 1996 were $1,652.1 million,
compared to $1,646.7 million for the same period in 1995.

          Results for the third quarter and nine months ended September 30,
1996, reflect the substantial reduction in market prices for primary
aluminum more fully discussed below (see "-- Trends -- Aluminum
Operations").  Alumina prices, which are significantly influenced by
changes in primary aluminum prices, also declined from period to period. 
The decrease in product prices more than offset the positive impact of
increases in shipments in several segments of Kaiser's business, as more
fully discussed below.

          From a comparative perspective, it should be noted that results
for the first nine months of 1995 reflect approximately $17.0 million of
first-quarter 1995 pre-tax expenses associated with an eight-day strike at
five major U.S. locations, a six-day strike at Kaiser's Alpart alumina
refinery, and a four-day disruption of alumina production at Alpart caused
by a boiler failure.

          Bauxite and Alumina
          Net sales for the bauxite and alumina segment increased by 15%
for the quarter ended September 30, 1996, from the comparable period in the
prior year, as increased shipments of alumina (27%) more than offset a 9%
decline in prices realized from the sale of alumina.  Net segment sales for
the nine months ended September 30, 1996, were basically unchanged from the
same period in 1995 as, on a year to date basis, nominal alumina price
declines were offset by a modest increase in alumina shipments.  The
reduction in prices realized, particularly for the quarter ended September
30, 1996, reflects the substantial decline in primary aluminum prices
experienced in 1996 discussed above, as well as the impact of certain short
term sales of previously uncommitted alumina production.

          Operating income (loss) for this segment of Kaiser's business
declined significantly from prior year periods as a result of: (1) reduced
gross margins from alumina sales resulting from the previously discussed
price declines; (2) high operating costs associated with disruptions in the
power supply at Kaiser's Alpart alumina refinery; and (3) increased natural
gas costs at Kaiser's Gramercy, Louisiana alumina refinery.  Operating
income for the nine months ended September 30, 1996, was also unfavorably
impacted by a temporary raw material quality problem experienced at
Kaiser's Gramercy facility during the second quarter of 1996.

          Aluminum Processing
          Net sales of primary aluminum declined by only 2% for the quarter
ended September 30, 1996, from the comparable prior year period as a 19%
reduction in prices realized was substantially offset by a 21% increase in
shipments.  For the first nine months of 1996 increases in shipments of
42.5% more than offset a 16% decline in product prices from period to
period.  The increases in shipments during the quarter and the nine months
ended September 30, 1996 are the result of increased shipments of primary
aluminum to third parties as a result of a decline in intracompany
transfers.

          Net sales of fabricated aluminum products were down 4% and 7% for
the quarter and the nine months ended September 30, 1996, respectively, as
compared to prior year periods as a result of reduced shipments (primarily
related to can sheet activities) resulting from suppressed growth in demand
and reduction of consumer inventories.  The impact of reduced product
shipments was to a limited degree offset by 5% and 7% increases in prices
realized from the sale of fabricated aluminum products for the quarter and
nine months ended September 30, 1996, respectively, resulting from a shift
in product mix (to higher-end value added products), due to reduced can
sheet shipments.

     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 nine months ended September 30, 1996 and
1995.


<TABLE>

<CAPTION>


                                        Three Months Ended          Nine Months Ended
                                          September 30,               September 30,       
                                    -------------------------   --------------------------
                                        1996          1995          1996          1995    
                                    ------------  ------------  ------------  ------------
                                    (In millions of dollars, except shipments and prices)
<S>                                 <C>           <C>           <C>           <C>
Shipments:
    Lumber: (1)
         Redwood upper grades               12.8          11.5          36.1          35.0
         Redwood common grades              57.1          48.3         175.2         164.2
         Douglas-fir upper grades            2.8           1.8           7.8           5.0
         Douglas-fir common grades          18.8          19.2          56.7          43.7
         Other                               5.5           2.6          15.8           9.6
                                    ------------  ------------  ------------  ------------
              Total lumber                  97.0          83.4         291.6         257.5
                                    ============  ============  ============  ============
    Logs (2)                                 4.5           4.8          16.1           6.9
                                    ============  ============  ============  ============
    Wood chips (3)                          55.8          67.1         157.2         166.8
                                    ============  ============  ============  ============
Average sales price:
    Lumber: (4)
         Redwood upper grades       $      1,368  $      1,514  $      1,382  $      1,510
         Redwood common grades               518           499           509           476
         Douglas-fir upper grades          1,108         1,261         1,138         1,308
         Douglas-fir common grades           489           416           435           395
    Logs (4)                                 478           453           498           462
    Wood chips (5)                            74           114            76           102

Net sales:
    Lumber, net of discount         $       60.5  $       52.3  $      175.9  $      158.0
    Logs                                     2.2           2.2           8.0           3.2
    Wood chips                               4.1           7.6          11.9          17.0
    Cogeneration power                       1.1            .9           2.4           1.7
    Other                                     .6            .3           1.4           1.0
                                    ------------  ------------  ------------  ------------
              Total net sales       $       68.5  $       63.3  $      199.6  $      180.9
                                    ============  ============  ============  ============
Operating income                    $       17.6  $       19.1  $       53.5  $       53.7
                                    ============  ============  ============  ============

Operating cash flow (6)             $       24.3  $       25.2  $       73.7  $       72.7
                                    ============  ============  ============  ============
Income before income taxes and
    minority interests              $         .7  $        2.6  $        4.0  $        2.6
                                    ============  ============  ============  ============
Capital expenditures                $        3.1  $        2.1  $        9.0  $        6.6
                                    ============  ============  ============  ============

<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>

          Shipments
          Lumber shipments to third parties for the third quarter of 1996
increased from the third quarter of 1995 due primarily to increased
shipments of both common and upper grade redwood lumber and upper grade
Douglas-fir lumber.  Lumber shipments to third parties for the nine months
ended September 30, 1996 increased from the nine months ended September 30,
1995 due primarily to increased shipments of both common and upper grade
Douglas-fir and redwood common lumber.  Log shipments for the nine months
ended September 30, 1996 were 16.1 million feet, an increase of 9.2 million
feet from the nine months ended September 30, 1995.

          Net sales
          Net sales for the third quarter of 1996 increased from the third
quarter of 1995.  This increase was principally due to higher shipments of
both common and upper grade redwood lumber and upper grade Douglas-fir
lumber and higher average realized prices for common grade redwood and
Douglas-fir lumber, partially offset by lower average realized prices for
upper grade redwood lumber and wood chips.

          Net sales for the nine months ended September 30, 1996 increased
from the nine months ended September 30, 1995.  This increase was primarily
due to higher shipments of common and upper grade Douglas-fir and redwood
lumber and increased log shipments and to higher average realized prices
for redwood and Douglas-fir common lumber.  These increases were partially
offset by lower average realized prices for upper grade redwood and
Douglas-fir lumber and wood chips.  Shipments of fencing and other value-
added common lumber products from the Company's new remanufacturing
facility were a contributing factor in the improved redwood common lumber
realizations.

          Operating income
          Operating income for the quarter ended September 30, 1996
decreased  from the comparable 1995 quarter.  Cost of goods sold increased
during the quarter ended September 30, 1996 compared to the same quarter in
1995 primarily due to lower margin common grade lumber accounting for a
larger percentage of total lumber shipments.  Operating income for the nine
month period, excluding a one time gain in 1995 of $1.5 million related to
business interruption proceeds for the settlement of claims related to an
April 1992 earthquake, increased in 1996 due to higher shipments of lumber.

          Income before income taxes and minority interests
          Income before income taxes for the third quarter of 1996
decreased from the third quarter of 1995 principally due to the decrease in
operating income discussed above.  Income before income taxes for the nine
months ended September 30, 1996 increased from the same period in 1995,
primarily as a result of increases in interest and investment income.

     REAL ESTATE AND OTHER OPERATIONS

<TABLE>

<CAPTION>


                                          Three Months Ended          Nine Months Ended
                                            September 30,               September 30,       
                                      -------------------------   --------------------------
                                          1996          1995          1996          1995    
                                      ------------  ------------  ------------  ------------
                                                     (In millions of dollars)
<S>                                   <C>           <C>           <C>           <C>
Net sales                             $      19.3   $      24.4   $      69.4   $      65.0 
Operating loss                               (4.6)         (2.8)         (7.3)         (6.4)
Income (loss) before income taxes
    and minority interests                    9.0            .6          10.2           (.9)

</TABLE>

          Net sales
          Net sales for the third quarter of 1996 decreased from the third
quarter of 1995 while net sales for the nine months ended September 30,
1996 increased over the same period in 1995.  Included in 1996 results are
$4.8 million and $15.1 million, respectively, of revenues attributable to
Sam Houston Race Park, Ltd., ("SHRP, Ltd.").  Operating results with
respect to SHRP, Ltd. were not consolidated prior to October 6, 1995.  Net
sales attributable to real estate operations for the third quarter and nine
months ended September 30, 1996 decreased from the same periods in 1995 due
to lower sales of real property in the Fountain Hills development in
Arizona and lower revenues from the RTC properties as the Company has sold
a number of these properties.

          Operating loss
          The operating loss increased for the third quarter of 1996 and
for the nine months ended September 30, 1996 from the same periods in 1995,
principally due to lower margins on sales of real property and operating
losses attributable to SHRP, Ltd. for the third quarter and the nine months
ended September 30, 1996 of $0.8 million and $1.6 million, respectively.

          Income (loss) before income taxes and minority interests
          Income before income taxes and minority interests for the third
quarter of 1996 and for the nine months ended September 30, 1996 increased
compared to the income (loss) for the same periods in 1995.   Investment,
interest and other income for the nine months ended September 30, 1996
includes a pre-tax gain of $16.9 million  from the sale of three multi-
family properties and the remaining mortgage notes from the RTC Portfolio
for $32.4 million in net proceeds.  Additionally, investment income for the
nine months ended September 30, 1996 includes income derived from lot sales
and operations at SunRidge Canyon, the Company's 50%-owned joint venture in
Arizona.  Interest expense for the third quarter of 1996 and for the nine
months ended September 30, 1996 includes interest on SHRP Ltd.'s Senior
Secured Extendible Notes (see Note 4 of the Condensed Notes to Consolidated
Financial Statements).

     OTHER ITEMS NOT DIRECTLY RELATED TO INDUSTRY SEGMENTS

<TABLE>

<CAPTION>


                                          Three Months Ended          Nine Months Ended
                                            September 30,               September 30,       
                                      --------------------------  --------------------------
                                          1996          1995          1996          1995    
                                      ------------  ------------  ------------  ------------
                                                     (In millions of dollars)
<S>                                   <C>           <C>           <C>           <C>
Operating loss                        $     (15.4)  $      (6.7)  $     (29.3)  $     (14.3)
Loss before income taxes and
    minority interests                      (16.8)         (7.6)        (32.4)        (15.2)

</TABLE>

          Operating loss
          The operating losses represent corporate general and
administrative expenses that are not attributable to the Company's industry
segments.  The operating losses for the third quarter of 1996 and the nine
months ended September 30, 1996 increased from the same periods in 1995. 
These increases were principally due to accruals  made in the third quarter
of 1996 and nine months ended September 30, 1996 of $12.9 million and $21.9
million, respectively, for certain legal contingencies.

          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 third quarter of 1996 and the nine months ended September 30, 1996
increased from the same periods in 1995 principally due to increased
operating losses discussed above.

          Credit (Provision) for Income Taxes
          The Company's credit for income taxes for the third quarter and
nine months ended September 30, 1996 and the provision for income taxes for
the third quarter and nine months ended September 30, 1995 include the
reversal of reserves the Company no longer believes are necessary (see Note
6 of the Condensed Notes to Consolidated Financial Statements).

          Minority interests
          Minority interests represent the minority stockholders' interest
in the Company's aluminum operations and, with respect to periods after
October 6, 1995, the minority partners' interest in SHRP, Ltd.

FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES

     THE COMPANY

          Certain of the Company's subsidiaries, principally Kaiser and
MGI, are restricted by their various debt agreements as to the amount of
funds that can be paid in the form of dividends or loans to the Company. 
The 1994 KACC Credit Agreement and the indentures governing the KACC Senior
Notes and the KACC Senior Subordinated Notes contain covenants which, among
other things, limit Kaiser's ability to pay cash dividends and restrict
transactions between Kaiser and its affiliates.  Pursuant to the terms of
the 1994 KACC Credit Agreement, Kaiser is precluded from paying any
dividends with respect to its common stock.  The indenture governing the
MGI Senior Notes and the MGI Discount Notes contains various covenants
which, among other things, limit the payment of dividends and restrict
transactions between MGI and its affiliates.  During the nine months ended
September 30, 1996, MGI paid dividends of $3.9 million.  As of September
30, 1996, no additional dividends could be paid by MGI. The most
restrictive covenants governing the debt of one of the Company's real
estate subsidiaries would not restrict the payment to the Company of all
available cash and unused borrowing availability for such subsidiary of
$12.1 million at September 30, 1996.

          As of September 30, 1996, the Company (excluding its
subsidiaries) had cash and marketable securities of approximately $56.7
million and borrowings available under its Custodial Trust Agreement
(defined below) of $25.0 million.  The Company believes that its existing
cash, cash equivalents and marketable securities (excluding such items
owned by its subsidiaries), together with available 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, distributions from its subsidiaries, and the proceeds
from the sale of debt securities should be sufficient to meet its working
capital requirements.  MAXXAM has stated that, from time to time, it may
purchase its common stock on national exchanges or in privately negotiated
transactions.  See Note 7 of the Condensed Notes to Consolidated Financial
Statements for a discussion of the Company's material contingencies.

          On June 28, 1996, the Company entered into a loan and pledge
agreement (the "Custodial Trust Agreement") with Custodial Trust Company
providing for up to $25.0 million in borrowings.  Any amounts borrowed
would be secured by Kaiser common stock owned by the Company (or such other
marketable securities acceptable to the lender) with an initial market
value (as defined therein) of approximately three times the amount
borrowed.  Borrowings under the Custodial Trust Agreement would bear
interest at the prime rate plus -1/2% per annum.  The Custodial Trust
Agreement provides for a revolving credit arrangement during the first year
of the agreement.  Any borrowings outstanding on the first anniversary date
of the agreement convert into a term loan maturing on the second
anniversary date of the agreement.  No borrowings were outstanding as of
September 30, 1996.

          On April 24, 1996, the SEC declared effective a shelf
registration statement which the Company had filed with respect to up to
$200.0 million aggregate principal amount of debt securities.  The Company
has not determined the amount, interest rates, maturity, collateral (if
any) or other terms of such debt securities or the timing of any offering
of such debt securities.  The debt securities could be secured by, or
convertible into, shares of common stock of Kaiser owned by the Company. 
In that regard, Kaiser also filed a shelf registration statement with the
SEC, which was also declared effective on April 24, 1996, covering 10
million shares of its common stock owned by the Company.  The Company would
use the net proceeds (or portions thereof) from the sale of such debt
securities to retire outstanding debt, for working capital and general
corporate purposes.

     ALUMINUM OPERATIONS

          On October 23, 1996, KACC completed the Offering of $175.0
million principal amount of the 10-7/8 Senior Notes at 99.5% of their
principal amount to yield 10.96% at maturity.  The 10-7/8% Senior Notes
rank pari passu with outstanding indebtedness under the 1994 KACC Credit
Agreement and the Senior Notes in right and priority of payment and are
guaranteed on a senior, unsecured basis by certain of Kaiser's
subsidiaries.  Net proceeds from the Offering on the Issuance Date, after
estimated expenses, were approximately $168.9 million, of which $91.7
million were utilized to reduce the outstanding borrowings under the
revolving credit facility of the 1994 Credit Agreement to zero.  The
remaining net proceeds (approximately $77.2 million) were invested in
short-term investments pending their application for working capital and
general corporate purposes, including capital projects.

          Loans under the 1994 KACC Credit Agreement bear interest at a
rate per annum, at KACC's election, equal to a Reference Rate (as defined)
plus a margin of 0% to 1-1/2% or LIBO Rate (Reserve Adjusted) (as defined)
plus a margin of 1-3/4% to 3-1/4%.  The interest rate margins applicable to
borrowings under the 1994 KACC Credit Agreement are based on a financial
test, determined quarterly.   During the first two quarters of 1996, Kaiser
paid interest at a rate per annum of the Reference Rate plus 0% or LIBO
Rate plus 1-3/4%.  During the third quarter of 1996, the per annum interest
rates increased by -1/2% to the Reference Rate plus -1/2% or LIBO Rate plus
2-1/4%.  Effective October 1, 1996, the margin applicable to loans under
the 1994 KACC Credit Agreement increased by an additional -1/2% per annum
based on the financial test.

          Kaiser's Board of Directors has approved a proposed
recapitalization (the "Proposed Recapitalization") which would, among other
things: (i) provide for two classes of common stock: Class A Common Shares
with one vote per share ("Class A Common Shares") and a new, lesser-voting
class designated as Common Stock with 1/10 vote per share ("Recap Common
Stock"); (ii) redesignate as Class A Common Shares the 100 million
currently authorized shares of Kaiser's existing common stock and authorize
an additional 250 million shares of Recap Common Stock; and (iii)
reclassify each issued share of Kaiser's existing common stock into (a) .33
of a Class A Common Share and (b) .67 of a share of Recap Common Stock.

          On May 1, 1996, Kaiser's stockholders approved the Proposed
Recapitalization, but it was not implemented at that time due to a
preliminary injunction issued by the Delaware Court of Chancery.  The
preliminary injunction was upheld on appeal by the Delaware Supreme Court
on August 29, 1996.  Kaiser's Board of Directors subsequently adopted a
resolution abandoning the Proposed Recapitalization.  Kaiser has filed a
motion with the Delaware Court of Chancery to dismiss the shareholder
litigation relating to the Proposed Recapitalization on the ground of
mootness and has filed a response to plaintiffs' motion for entry of a
permanent injunction.  The Court has not ruled on either motion.  See Part
II, Item 1 "Legal Proceedings -- Kaiser Litigation -- Other Proceedings"
for further information.

          The decision to abandon the Proposed Recapitalization does not
preclude a recapitalization from being proposed to Kaiser's stockholders in
the future, including a substantially identical recapitalization structure
after the redemption or conversion of the PRIDES.  In the event that such a
recapitalization were implemented in the future, MAXXAM could retain a
majority of the voting power of Kaiser even if it substantially reduced its
total holdings of Kaiser's equity securities by more than two-thirds.

          Kaiser's capital expenditures during the first nine months of
1996 were $91.1 million, which were used primarily to improve production
efficiency, reduce operating costs, expand capacity at existing facilities,
and construct new facilities, including Kaiser's first micromill which is
nearing completion in Nevada as a full-scale demonstration and production
facility.

          Kaiser's capital expenditures (of which approximately 6% is
expected to be funded by Kaiser's minority partners in certain foreign
joint ventures) are expected to be between $130.0 and $160.0 million per
annum in each of 1996 through 1998.  Management continues to evaluate
numerous projects all of which require substantial capital, including
Kaiser's micromill project and other potential opportunities both in the
United States and overseas.  In response to lower aluminum and alumina
prices, management may consider deferring certain non-essential capital
expenditures and/or raising investment capital (including through joint
ventures), in order to conserve a portion of Kaiser's available cash
resources to meet incremental capital and operating requirements and to
take advantage of new investment opportunities.

          During July 1996, the directors of Yellow River Aluminum Industry
Company Limited (the "Joint Venture"), a Sino-foreign joint equity
enterprise organized under the law of the People's Republic of China
between Kaiser Yellow River Investment Limited ("KYRIL"), a subsidiary of
KACC, and Lanzhou Aluminum Smelters ("LAS") of the China National
Nonferrous Metal Industry Corporation, KYRIL and LAS reached an agreement
(i) that extended until early 1997, the time for KYRIL to make a second
capital contribution to the Joint Venture, and (ii) that KYRIL would
continue to explore various methods of financing any future capital
contributions to the Joint Venture, including financing that could be
obtained from third-party investors.

          Management believes that Kaiser's existing cash resources,
together with cash flows from operations and borrowings under the 1994 KACC
Credit Agreement, will be sufficient to meet its working capital and
capital expenditure requirements for the next year.  Additionally, with
respect to long-term liquidity, management believes that operating cash
flows, together with the ability to obtain short and long-term financing,
should provide sufficient funds to meet Kaiser's working capital and
capital expenditure requirements.

     FOREST PRODUCTS OPERATIONS

          As of September 30, 1996, $45.4 million of borrowings was
available under Pacific Lumber's Revolving Credit Agreement, of which $4.7
million was available for letters of credit and $30.0 million for
timberland acquisitions.  No borrowings were outstanding as of September
30, 1996, and letters of credit outstanding amounted to $10.3 million.

          MGI and its subsidiaries anticipate that cash flow 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 cash flow from operations and 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 are more
sensitive than less-leveraged companies to factors affecting their
operations, including litigation and governmental regulation affecting
their timber harvesting practices, increased competition from other lumber
producers or alternative building products and general economic conditions.

     REAL ESTATE AND OTHER OPERATIONS

          As of September 30, 1996, the Company's real estate and other
subsidiaries had approximately $11.0 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

     ALUMINUM OPERATIONS

          Recent Trends and Developments
          During 1995, the average Midwest U.S. transaction price (the "AMT
Price") for primary aluminum was approximately $.86 per pound compared to
$.72 and $.54 per pound in 1994 and 1993, respectively.  The significant
improvement in prices during 1994 and 1995 resulted from strong growth in
Western world consumption of aluminum and the curtailment of production in
response to lower prices in prior periods by many producers worldwide.  In
1995, production of primary aluminum increased and consumption of aluminum
continued to grow, but at a much lower rate than in 1994.  In general, the
overall aluminum market was strongest in the first half of 1995.  By the
second half of 1995, orders and shipments for certain products had softened
and the rate of decline in London Metal Exchange ("LME") inventories had
leveled off.  By the end of 1995, some small increases in LME inventories
occurred, and prices of aluminum weakened from first-half levels.  This
trend has continued throughout the first ten months of 1996 as the supply
of primary aluminum exceeded demand during this period.  Net reported
primary aluminum inventories have increased by approximately 230,000 tons
in 1996 based upon recent reports of the LME (through November 1, 1996) and
the International Primary Aluminum Institute (through August 31, 1996),
following substantial declines of 764,000 and 1,153,000 tons in 1994 and
1995, respectively.  The AMT Price for primary aluminum for the week ended
November 1, 1996, was approximately $.68 per pound.

     Increased production of primary aluminum due to restarts of certain
previously idled capacity, the commissioning of a major new smelter in
South Africa, and the continued high level of exports from the Commonwealth
of Independent States have contributed to increased supplies of primary
aluminum to the Western world in 1996.  While the economies of the major
aluminum consuming regions -- the United States, Japan, Western Europe, 
and Asia -- are performing relatively well, management believes that the 
reduction of aluminum inventories by consumers, as prices have continued 
to decline, has suppressed the growth in primary aluminum demand that 
normally accompanies growth in economic and industrial activity.  In addition
to these supply/demand dynamics, management believes the recent decline in
primary aluminum prices may have been influenced by a recent major decline in
copper prices on the LME.

          Fourth Quarter Results
          Kaiser expects to continue to sustain net losses in the fourth
quarter of 1996 due principally to lower average realized prices for
alumina and primary aluminum, as compared to prices realized in the fourth
quarter of 1995, and due to increased raw material, energy, and operational
costs associated with the production of alumina at Kaiser's Gramercy
alumina refinery and 65% owned Alpart alumina refinery in Jamaica, as
compared to amounts incurred in the fourth quarter of 1995.  Such losses
could substantially exceed the loss for the third quarter of 1996 if the
price of primary aluminum does not increase from current levels.

          Profit Enhancement and Cost Cutting Initiative
          Kaiser has set a goal of achieving significant cost reductions
and other profit improvements during 1997, with the full effect planned to
be realized in 1998.  The initiative is based on Kaiser's conclusion that
the current level of performance of its existing facilities and businesses
will not achieve the level of profits Kaiser considers satisfactory based
upon historic long-term average prices for primary aluminum and alumina. 
To achieve this goal, Kaiser plans reductions in production costs,
improvements in operating efficiencies, decreases in corporate selling,
general and administrative expenses and enhancements to product mix.  There
can be no assurance that the initiative will result in the desired cost
reductions and other profit improvements.


     FOREST PRODUCTS OPERATIONS

          The Company's forest products operations are primarily conducted
by Pacific Lumber and are subject to a variety of California and federal
laws and regulations dealing with timber harvesting, endangered species and
critical habitat, and air and water quality.  Compliance with such laws and
regulations together with the cost of litigation incurred in connection with
certain THPs filed by Pacific Lumber have increased the cost of logging
operations.  While the Company does not expect that Pacific Lumber's 
compliance with such existing laws and regulations will have a material 
adverse effect on the Company's consolidated financial position, results 
of operations or liquidity, Pacific Lumber is subject to certain pending 
matters described below, including the resolution of issues relating to the 
final designation of critical habitat for the marbled murrelet, which could 
have a material adverse effect on Pacific Lumber's consolidated financial 
position, results of operations or liquidity.  Moreover, the laws and 
regulations relating to Pacific Lumber's forest products operations are 
modified from time to time and are subject to judicial and administrative
interpretation.  There can be no assurance that certain pending or future 
governmental regulations, legislation or judicial or administrative decisions
would not materially and adversely affect Pacific Lumber or its ability to 
harvest timber.  See also Note 8 of the Condensed Notes to Consolidated 
Financial Statements set forth in Part I, Item 1 of this Report for further
information concerning the Headwaters Agreement and Part II, Item 1. "Legal
Proceedings--Pacific Lumber Litigation" for further information, including 
government takings actions recently filed and additional takings claims which 
could be filed by Pacific Lumber and its subsidiaries.

          In May 1996, the U.S. Fish and Wildlife Service (the "USFWS")
published its final designation of critical habitat for the marbled
murrelet ("Final Designation"), designating over four million acres as
critical habitat for the marbled murrelet.  Although nearly all of the
designated habitat is public land, approximately 33,000 acres of the
Company's timberlands are included in the Final Designation, the
substantial portion of such 33,000 acres being young growth timber. 
Pacific Lumber's wildlife surveys to date (based upon current survey
protocols) have indicated that Pacific Lumber has approximately 6,600 acres
of occupied marbled murrelet habitat.  A substantial portion of this land
contains virgin and residual old growth timber and the bulk of it falls
within the area covered by the Final Designation.  In order to mitigate the
impact of the Final Designation, particularly with respect to timberlands
occupied by the marbled murrelet, Pacific Lumber over the last few years
has attempted to develop a habitat conservation plan for the marbled
murrelet (the "Murrelet HCP").  Due to, among other things, the unfavorable
response of the USFWS to Pacific Lumber's initial Murrelet HCP efforts,
Pacific Lumber and its subsidiaries filed two actions (the "Takings
Litigation") alleging that certain portions of its timberlands have been
"taken" and seeking just compensation (see Part II, Item 1, "Legal
Proceedings -- Pacific Lumber Litigation" for a description of the Takings
Litigation).  Pursuant to the Headwaters Agreement, as described in Note 8
of the Condensed Notes to Consolidated Financial Statements, the Takings
Litigation has been stayed by the court at the request of the parties.

          It is impossible to determine the potential adverse effect of the
Final Designation on Pacific Lumber's consolidated financial position,
results of operations or liquidity until such time as all of the material
regulatory and legal issues are resolved; however, if Pacific Lumber is
unable to harvest, or is severely limited in harvesting, on timberlands
designated as critical habitat for the marbled murrelet, such effect could
be material.  If Pacific Lumber is unable to harvest or is severely limited
in harvesting, it intends to seek just compensation from the appropriate
governmental agencies on the grounds that such restrictions constitute a
governmental taking.  There continues to be other regulatory actions and
lawsuits seeking to have various other species listed as threatened or
endangered under the federal Endangered Species Act ("ESA") and/or the
California Endangered Species Act and to designate critical habitat for
such species.  For example, the National Maine Fisheries Service ("NMFS")
recently announced that by April 25, 1997, it would make a final
determination concerning whether to list the coho salmon under the ESA in
northern California, including, potentially, lands owned by Pacific Lumber. 
It is uncertain what impact, if any, such listings and/or designations of
critical habitat would have on Pacific Lumber's consolidated financial
position, results of operations or liquidity.  See Note 8 of Condensed
Notes to Consolidated Financial Statements for a description of certain
terms of the Headwaters Agreement relating to processing and approval of a
multi-species habitat conservation plan ("Multi-Species HCP") covering
Pacific Lumber's timberlands.

          Judicial or regulatory actions adverse to Pacific Lumber,
increased regulatory delays and inclement weather in northern California,
independently or collectively, could impair Pacific Lumber's ability to
maintain adequate log inventories and force Pacific Lumber to temporarily
idle or curtail operations at certain of its lumber mills from time to
time.

PART II.      OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

     Reference is made to Item 3 of the Form 10-K and Part II, Item 1 of
the Company's Quarterly Report on Form 10-Q for the quarterly periods ended
March 31 and June 30, 1996 (the "Form 10-Q") for information concerning
material legal proceedings with respect to the Company.  The following
material developments have occurred with respect to such legal proceedings.

USAT MATTERS

     In connection with the FDIC action, the court has scheduled a pre-
trial conference for November 19, 1996.

     In connection with the OTS action, the U.S. Fifth Circuit Court of
Appeals has scheduled oral argument on the merits of the case for December
4, 1996.

RANCHO MIRAGE LITIGATION

     In connection with the In Re: MAXXAM Inc./Federated Development
Shareholder's Litigation, on August 14, 1996, the court heard final oral
argument on the merits of the case, but has not yet issued its decision. 
By order dated September 6, 1996, the court denied defendants' motion to
dismiss the 1987 loan claims and granted plaintiffs' motion to intervene
and substitute a new plaintiff to cure standing problems concerning
plaintiffs' 1987 loan claims.

KAISER LITIGATION

          Environmental Proceedings
          In connection with the Aberdeen Pesticide Dump Site Matter, in
May 1996, the Environmental Protection Agency (the "EPA") urged KACC to
rejoin the respondents who are parties to a PRP Participation Agreement
(the "Group") and indicated that it would consider seeking penalties
against KACC if it did not.  On October 10, 1996, the EPA notified KACC
that it deems KACC to be in violation of Administrative Orders issued by
the EPA under Section 106(a) of CERCLA ordering the respondents, including
KACC, to perform the soil remedial design and remedial action described in
the Record of Decision for the Aberdeen Pesticide Dumps Site (the "Sites"). 
KACC and certain members of the Group have entered into an agreement with
the United States Department of Justice to engage in a mediation process
regarding an appropriate allocation of responsibility for response costs at
the Sites.  KACC has also agreed to fund a portion of the costs associated
with certain work at the Sites during the mediation process.

          In connection with Catellus Development Corporation v. Kaiser
Aluminum & Chemical Corporation and James L. Ferry & Son Inc. (the
"Catellus action"), on July 8, 1996, the United States District Court for
the Northern District of California issued an order awarding the City of
Richmond, et al. (the "Plaintiffs") nominal costs, which amount has been
paid.  The order also awarded Catellus Development Corporation ("Catellus")
de minimis costs.  Catellus has filed a notice of appeal.  On August 12,
1996, the Court issued an order granting the Catellus motion for attorneys'
fees in the amount of approximately $.9 million.  KACC and Catellus have
filed notices of appeal with respect to the attorneys' fees award.  Based
on KACC's estimate of future costs of cleanup, resolution of the Catellus
matter is not expected to have a material adverse effect on the Company's
consolidated financial condition, results of operations, or liquidity.

          In connection with the Waste Inc. Superfund Site matter, KACC has
now entered into a Participation Agreement with thirteen of the respondents
to perform the work required under the unilateral Administrative Order for
Remedial Design and Remedial Action issued by the EPA under CERCLA to
thirty-two respondents, including KACC, for remedial design and action at
the Waste Inc. Superfund Site at Michigan City, Indiana.

          Asbestos-related 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. 
See Note 7 of the Condensed Notes to Consolidated Financial Statements for
further information.

          Other Proceedings
          In connection with Matheson et al. v. Kaiser Aluminum Corporation
et al., on August 29, 1996, the Delaware Supreme Court upheld the
preliminary injunction and remanded the case to the Court of Chancery.  On
September 24, 1996, the plaintiffs filed a motion to make permanent the
temporary injunction issued on April 8, 1996.  On September 27, 1996,
Kaiser's Board of Directors adopted a resolution abandoning the Proposed
Recapitalization.  On October 2, 1996, Kaiser filed a motion in the
Delaware Court of Chancery to dismiss the shareholder litigation relating
to the Proposed Recapitalization on the ground of mootness and has filed a
response to plaintiffs' motion for entry of a permanent injunction.  The
Court has not ruled on either motion.  See also "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Investing
and Financing Activities -- Aluminum Operations."

          In connection with the Hammons action, on July 18, 1996, the
plaintiff filed a notice of appeal to the United States Court of Appeals
for the Ninth Circuit appealing the summary judgement granted by the United
States District Court for the Central District of California in favor of
KACC and other defendants and the Court's dismissal of the complaint as to
all defendants.

PACIFIC LUMBER LITIGATION

          In connection with the Kayes/Miller action and the DOL civil
action, the previously announced settlement became final on August 28,
1996.

          In connection with the Marbled Murrelet action, on August 23,
1996, plaintiffs filed a renewed motion for preliminary injunction to
prevent harvesting of dead, dying or diseased trees ("exempt harvesting
operations") in Pacific Lumber's old growth timberlands.  In addition, on
September 12, 1996, plaintiffs requested an emergency TRO with respect to
such harvesting operations.  The court denied both of these motions.  On
October 9, 1996, Pacific Lumber was cited for accidentally downing a
hemlock tree and ordered to stop exempt harvesting operations in its old
growth timberlands for 24 hours.  Plaintiffs sought a TRO and preliminary
injunction based on this citation and related events.  After hearing
plaintiffs' motions, the court denied the plaintiffs' requests.  The CDF
has withdrawn the citation and asked that it be dismissed.

          In related matters, in August, 1996, the Sierra Club, EPIC and
others petitioned the BOF to adopt emergency regulations preventing Pacific
Lumber from undertaking exempt harvesting operations in its old growth
timberlands.  On September 9, 1996, the BOF rejected such proposals and
petitions.  In September and October, the BOF was formally asked to
reconsider its September 9, 1996 decision.  The BOF reconsidered this
matter and, ultimately, enacted no emergency regulation to prevent or
further restrict Pacific Lumber's exempt harvesting operations in its old
growth timberlands.

          On November 4, 1996, the U.S. Ninth Circuit Court of Appeals
heard oral argument concerning defendants' appeal of the preliminary
injunction issued on April 3, 1996 preventing harvesting on eight THPs to
the extent each relies on the Owl Plan; the court has not yet rendered a
decision in this matter.  In that regard, Pacific Lumber has obtained
regulatory reapproval of seven of the enjoined eight THPs without reliance
on the Owl Plan and has, to date, confirmed with the court that four of
those THPs are not subject to the preliminary injunction.

          In connection with the EPIC action, on September 24, 1996,
Pacific Lumber filed its petition for writ of certiorari requesting that
the U. S. Supreme Court consider its appeal of the permanent injunction
concerning harvesting operations in connection with a THP for approximately
237 acres of primarily virgin old growth timber (THP 90-237). 

          In conjunction with the Headwaters Agreement (see Note 7 of the
Condensed Notes to Financial Statements set forth in Part I, Item 1),
the two actions entitled The Pacific Lumber Company, et al. v.
The United States of America and Salmon Creek Corporation v. California
State Board of Forestry, et al. have been stayed by the court at the
request of the parties.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

     A.   EXHIBITS:

     4.1  Sixth Amendment to Credit Agreement, dated as of October 1, 1996,
          amending the Credit Agreement, dated as of February 15, 1994, as
          amended, among Kaiser, KACC, the financial institutions a party
          thereto, and BankAmerica Business Credit, Inc., as Agent
          (incorporated by reference to Exhibit 4.1 to Kaiser's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1996,
          File No. 1-9447)

     4.2  Indenture, dated as of October 23, 1996, among KACC, as issuer,
          Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
          Jamaica Corporation, Kaiser Finance Corporation, Kaiser Micromill
          Holdings, LLC, Kaiser Sierra Micromills, LLC, Kaiser Texas
          Micromill Holdings, LLC and Kaiser Texas Sierra Micromills, LLC,
          as subsidiary guarantors (the "Subsidiary Guarantors"), and First
          Trust National Association, as Trustee regarding KACC's 10-7/8%
          Senior Notes due 2006 (incorporated by reference to Exhibit 4.2
          to Kaiser's Quarterly Report on Form 10-Q for the quarter ended
          September 30, 1996, File No. 1-9447)

     10   Agreement dated September 28, 1996 between MAXXAM Inc., The
          Pacific Lumber Company (on behalf of itself, its subsidiaries and
          its affiliates) the United States of America and the State of
          California (incorporated herein by reference to Exhibit 10.1 to
           the Company's Form 8-K dated September 28, 1996)

     11   Computation of Net Income Per Common and Common Equivalent Share
          
     27   Financial Data Schedule

     B.   REPORTS ON FORM 8-K:

          On October 3, 1996, the Company filed a Current Report on Form 8-
K, dated September 28, 1996, concerning the Headwaters Agreement.

                                 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 has signed this report on
behalf of the Registrant and as the principal accounting officer of the
Registrant.


                                          MAXXAM INC.





 Date: November 12, 1996      By:      TERRY L. FREEMAN         
                                        Terry L. Freeman
                                      Assistant Controller