SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                    FORM 10-Q

                        _________________________________


             QUARTERLY REPORT PURSUANT TO SECTION 12 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


For quarter ended March 31, 1999           Commission File Number: 333-19257


                             MOTORS AND GEARS, INC.
              (Exact name of registrant as specified in charter)

     Delaware                                            36-4109641
(State or other jurisdiction of                       (I.R.S. Employer 
incorporation or organization)                        Identification No.)       

     ArborLake Centre, Suite 550                            60015
       1751 Lake Cook Road                                (Zip Code)
       Deerfield, Illinois
(Address of Principal Executive Offices)


             Registrant's telephone number, including area code:
                               (847) 945-5591


     Former name, former address and former fiscal year, if changed since last 
report: Not applicable.

     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 twelve (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 ninety (90) days.

          Yes    X                       No        

     The aggregate market value of voting stock held by non-affiliates of the 
Registrant is not determinable as such shares were privately place and there 
is currently no public market for such shares.

     The number of shares outstanding of Registrant's Common Stock as of May 
13, 1999:  100,000.

<PAGE>


                              MOTORS AND GEARS, INC.


                                       INDEX


Part I     FINANCIAL INFORMATION                                   PAGE NO.

Item 1.    Financial Statements (Unaudited)                           3

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                        9

Item 3.    Quantitative and Qualitative Disclosures About
           Market Risk                                                12


Part II    OTHER INFORMATION

Item 1.    Legal Proceedings                                          13

Item 2.    Changes in Securities and Use of Proceeds                  13

Item 3.    Defaults Upon Senior Securities                            13

Item 4.    Submission of Matters to a Vote of Security
           Holders                                                    13

Item 5.    Other Information                                          13

Item 6.    Exhibits and Reports on Form 8-k                           13

           Signatures                                                 14


<PAGE>



                          PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS (Unaudited)


                                                                PAGE NO.


Condensed Consolidated Balance Sheets at March 31, 1999,
and December 31, 1998                                               4

Condensed Consolidated Statements of Income for the
three months ended March 31, 1999 and 1998                          5

Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 1998                                6

Notes to Condensed Consolidated Financial Statements               7-8



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                         MOTORS AND GEARS, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                  (ALL DOLLAR AMOUNTS IN THOUSANDS)



                                                  March 31,    December 31,
                                                    1999           1998      
                                                       (Unaudited)

ASSETS
Current Assets:
 Cash and cash equivalents                         $ 10,983      $   7,016
 Accounts receivable, net                            54,403         51,969
 Inventories                                         41,622         43,318
 Prepaid expenses and other current assets            3,004          3,058
     Total Current Assets                           110,012        105,361

 Property, plant, and equipment, net                 21,781         22,268
 Goodwill, net                                      231,865        232,058
 Deferred financing costs, net                       13,735         14,182
 Deferred income taxes                                4,436          4,868
 Investment in affiliate                              7,285          7,285
 Other assets, net                                    2,641          2,799
     Total Assets                                  $391,755       $388,821

LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
 Accounts payable                                  $ 23,097       $ 23,832
 Accrued interest payable                            11,803          4,756
 Accrued expenses and other current liabilities       9,818          7,274  
 Due to affiliated company                                -          1,216
 Current portion of long term debt                      343            361
     Total Current Liabilities                       45,061         37,439

Long-Term debt                                      320,485        325,455
Other non-current liabilities                         3,193          3,314

Shareholder's Equity:
 Common Stock                                             1              1
 Additional paid-in-capital                          50,005         50,005
 Accumulated other comprehensive income/(loss)         (280)         1,947
 Accumulated deficit                                (26,710)       (29,340)
     Total Shareholder's Equity                      23,016         22,613
     Total Liabilities and Shareholder's Equity    $391,755       $388,821









See accompanying notes to condensed consolidated financial statements.


<PAGE>

                             MOTORS AND GEARS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
                                  (UNAUDITED)
                     (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                        
    
                                                     Three Months Ended
                                                           March 31,   
                                                      1999        1998

Net Sales                                            $76,491     $58,567
Cost of sales, excluding depreciation                 48,818      38,212
Selling, general, and administrative expenses         10,297       7,722
Depreciation                                           1,320       1,205
Amortization of goodwill and other intangibles         2,238       1,819
Management fees and other                                764         618

     Operating income                                 13,054       8,991

Other (income)/expense:
   Interest expense                                    8,538       7,820
   Interest income                                       (80)       (363)
   Miscellaneous, net                                   (185)         - 
Income before income taxes                             4,781       1,534

Provision for income taxes                             2,151         651

     Net income                                      $ 2,630     $   883
                               






See accompanying notes to condensed consolidated financial statements.

<PAGE>


                                MOTORS AND GEARS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (UNAUDITED)
                          (ALL DOLLAR AMOUNTS IN THOUSANDS)


                                                      Three Months Ended
                                                           March 31,    
                                                        1999       1998
Cash flows from operating activities:
 Net income                                            $ 2,630    $   883
Adjustments to reconcile net income to net  
 cash provided by operating activities:
   Depreciation and amortization                         3,628      3,345
   Provision for deferred income taxes                       -        264

Changes in operating assets and liabilities net
 of effects from acquisitions:
   Current assets                                         (412)    (3,244) 
   Current liabilities                                   8,857      5,175 
   Non-current assets & liabilities                        311         (8)
   Payables to affiliated company                       (1,540)       117 
   Net cash provided by operating activities            13,474      6,532 

Cash flows from investing activities:
   Capital expenditures, net                              (609)      (902)
   Contingent purchase price and acquisition fees       (3,151)       (50)
   Net cash used in investing activities                (3,760)      (952)
   
Cash flows from financing activities:
   Repayment of borrowings under revolving
    credit facility and other long-term debt            (5,064)        (5)
   Net cash used in financing activities                (5,064)        (5)

Effect of exchange rate changes on cash                   (683)      (890)

Net increase in cash and cash equivalents                3,967      4,685

Cash and cash equivalents at beginning of period         7,016     28,880
Cash and cash equivalents at end of period             $10,983    $33,565






See accompanying notes to condensed consolidated financial statements.

<PAGE>

                             MOTORS AND GEARS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                      (ALL DOLLAR AMOUNTS IN THOUSANDS)

1.  Organization

The unaudited condensed consolidated financial statements, which reflect all 
adjustments that management believes necessary to present fairly the results 
of interim operations and which are of a normal recurring nature, should be 
read in conjunction with the Company's consolidated financial statements for 
the year ended December 31, 1998, included in the Company's annual report on 
Form 10-K.  The Company conducts its operations exclusively through its 
subsidiaries.  Results of operations for the interim periods are not 
necessarily indicative of annual results of operations.

2.  Summary of Significant Accounting Policies

The condensed consolidated financial statements include the accounts of Motors 
and Gears, Inc. and its subsidiaries.  Material intercompany transactions and 
balances are eliminated in consolidation.  Operations of certain subsidiaries 
outside the United States are included for periods ending two months prior to 
the Company's year end and interim periods to ensure timely preparation of the 
condensed consolidated financial statements.

3.  Inventories

Inventories are summarized as follows:
                                     March 31,       December 31,
                                       1999             1998    

     Raw materials                    $27,285          $27,101
     Work in process                    9,754           10,626
     Finished goods                     4,583            5,591
                                      $41,622          $43,318

4.  Acquisition of Subsidiaries

On May 15, 1998, the Company acquired all of the outstanding stock of Advanced 
D.C. Motors, Inc. and its affiliated corporations (collectively "ADC") for 
$58,651.  The purchase price, including costs incurred directly related to the 
transaction, was allocated to working capital of $9,345; property and 
equipment of $4,088; covenants not to compete of $662; other long-term assets 
and liabilities of $(51); and resulted in an excess purchase price over net 
identifiable assets of $44,607.  The Company also has a contingent purchase 
price agreement of up to approximately $5,600 relating to the acquisition of 
ADC.  The contingent purchase price is dependent upon the acquired entity's 
results of operations exceeding certain targeted levels substantially above 
the historical experience of ADC at the time of acquisition.  ADC designs and 
manufactures special purpose, custom designed motors for use in electric lift 
trucks, power sweepers, electric utility vehicles, golf carts, electric boats, 
and other niche products.  ADC also designs and manufactures its own 
production equipment as well as electric motor components known as 
commutators.

<PAGE>


On December 31, 1998, the Company, through its wholly-owned subsidiary 
Imperial Electric Company, acquired all of the outstanding stock of Euclid 
Universal Corporation ("Euclid") for $2,100.  The purchase price, including 
costs incurred directly related to the transaction, was preliminarily 
allocated to working capital of $772; property and equipment of $953; other 
long-term assets and liabilities of ($498); and resulted in an excess purchase 
price over net identifiable assets of $873.  Euclid designs and manufactures 
speed reducers, customer gearing, right angle gearboxes and transaxles for use 
in a wide array of industries including material handling, healthcare and 
floor care.  Euclid has strong technical expertise in the areas of worm, spur 
and helical gearing.

Acquisitions of the Company have been financed primarily through the use of 
the revolving line of credit and the issuance of Senior Debt.  These 
acquisitions have been accounted for using the purchase method of accounting.  
Accordingly, the operating results of each of these acquisitions have been 
included in the consolidated operating results of the Company since the date 
of their acquisition.

Proforma information with respect to the Company for the first quarter of 1998 
as if the 1998 acquisitions had occurred on January 1, 1998 is as follows:

                                             Three Months Ended
                                               March 31, 1998    
                                              
                                             
     Net sales                                     $70,151
     Income before income taxes                      3,721
     Net income                                      2,047

5.  Comprehensive Income

Total comprehensive income/(loss) for the three months ended March 31, 1999 
and 1998 is as follows:

                                                 Three Months Ended
                                                       March 31,    
                                                   1999        1998

     Net Income                                   $2,630     $   883
     Foreign currency translation adjustment      (2,227)     (3,088)
     Comprehensive income/(loss)                  $  403     $(2,205)

6.  Business Segment Information

See Part 1 "Financial Information" - Item 2 "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" for the Company's 
business segment disclosures.  There have been no changes from the Company's 
December 31, 1998 consolidated financial statements with respect to 
segmentation  or the measurement of segment profit.


<PAGE>



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

Summary financial information included in the financial statements of the 
Company is as follows:

                                            Three Months Ended
                                                  March 31,     
                                              1999       1998  
                                                (Unaudited)
                                       (Dollar amounts in thousands)
Net sales
  Motors                                    $61,329    $43,496
  Controls                                   15,162     15,071
                                             76,491     58,567
Operating income 
  Motors                                     13,491      8,863
  Controls                                    1,748      1,829
                                             15,239     10,692
Management fees and unallocated
 corporate overhead                           2,185      1,701
Total operating income                       13,054      8,991

Interest expense                              8,538      7,820
Interest income and other                      (265)      (363)
Income before income taxes                  $ 4,781    $ 1,534


Consolidated Results of Operations

Net sales for the first quarter increased 31% to $76.5 million, up $17.9 
million from the first quarter of 1998.  The strong sales growth was primarily 
driven by the two acquisitions in 1998 which accounted for $14.2 million of 
the growth.  The remaining $3.7 million was the result of organic sales 
growth.  Net sales of subfractional motors for the first quarter increased 
11%, mainly attributed to continued strength in the vending machine and 
appliance markets. Net sales of fractional/integral motors, excluding the 1998 
acquisitions,  increased 6%, driven mostly by stronger sales in the floor care 
and elevator markets.

Operating income for the first quarter increased 45% to $13.1 million, up $4.1 
million from the first quarter of 1998.  The increase in operating income was 
primarily the result of the increased sales described above.  Gross margins 
increased from 34.8% to 36.2%, predominantly driven by the effects of the 1998 
acquisitions and increased margins in the controls segment.  Increased 
operating income resulting from the increased sales described above was 
partially offset by increased corporate expenses.  Operating margins increased 
from 15.4% to 17.1%, mainly as the result of the 1998 acquisitions and an 
increase in operating margins of subfractional motors.

Interest expense increased $0.7 million from $7.8 million in the first quarter 
of 1998 to $8.5 million in the first quarter of 1999, reflecting higher debt 
levels related to the financing of new acquisitions.

<PAGE>

Liquidity and Capital Resources

In general, the Company requires liquidity for working capital, capital 
expenditures, interest, taxes, debt repayment and its acquisition strategy.  
Of primary importance are the Company's working capital requirements, which 
increase whenever the Company experiences strong incremental demand or 
geographical expansion.  The Company expects to satisfy its liquidity 
requirements through a combination of funds generated from operating 
activities and the funds available under its revolving credit facility.

Operating activities.  Net cash provided by operating activities for the 
quarter ended March 31, 1999 was $13.5 million, compared to $6.5 million 
provided from operating activities during the same period in 1998.  An 
increase in net income and improved working capital performance during the 
first quarter of 1999 as compared to the same period of 1998 are the main 
factors contributing to the increase in cash flow from operating activities.

Investing activities.  In the first quarter of 1999, the Company made a $3.2 
million contingent purchase price payment to the sellers of ADC as a result of 
ADC 1998 operations exceeding certain targeted levels.  These targeted levels  
were established in the acquisition agreement between the Company and the 
sellers of ADC.  The agreement provides for an additional contingent payment 
to be made to the sellers of ADC on or before April 1, 2000, contingent upon 
ADC 1999 operations exceeding certain targeted levels which have been set 
substantially above the historical experience of ADC.
 
The Company plans to fund future acquisitions through its revolving credit 
facility and excess operating cash flow.

Financing activities.  The Company's annual cash interest expense on the 
Senior Notes, which are due 2006, will be approximately $29.0 million.  
Interest on the Senior Notes is payable semi-annually on May 15 and November 
15 of each year.  Interest paid on the Junior Seller Notes was $0.5 million in 
the first quarter of 1999.

The Company is party to a Credit Agreement under which the Company is able to 
borrow up to approximately $75.0 million over a term of five years to fund 
acquisitions and provide working capital, and for other general corporate purpos
es. Obligations under the Credit Agreement are guaranteed by M&G Industries' 
subsidiaries, and secured by pledges of the stock of M&G Industries' 
subsidiaries and liens in respect of certain assets of M&G Industries and its 
subsidiaries.  As of May 13, 1999, the Company has approximately $46.7 million 
of available funds under this Agreement.  In addition, under the terms of the 
Series D Notes, the Company is able to increase the credit facility to 
approximately $115.0 million.

The Company expects its principal sources of liquidity to be from its 
operating activities and funding from the revolving line-of-credit agreement.  
The Company further expects that these sources will enable it to meet its 
long-term cash requirements for working capital, capital expenditures, 
interest, taxes, and debt repayment for at least the next 12 months.


<PAGE>

Year 2000 Disclosure

Introduction.  The Year 2000 issue is the result of computer programs being 
written using two digits rather than four to define the applicable year.  Any 
of the Company's computer programs or hardware that have date-sensitive 
software or embedded chips may recognize a date using "00" as the year 1900 
rather than the year 2000.  This could result in a system failure or 
miscalculations causing disruptions of operations, including, among other 
things, a temporary inability to process transactions, send invoices, or 
engage in similar normal business activities.

State of Readiness.  The Company has determined that it will be required to 
modify or replace significant portions of its software and certain hardware so 
that those systems will properly utilize dates beyond December 31, 1999.  The 
Company presently believes that with modifications or replacements of existing 
software and certain hardware, the Year 2000 issue can be mitigated.  However, 
if such modifications and replacements are not made, or are not completed 
timely, the Year 2000 issue could have a material impact on the operations of 
the Company.

The Company's plan to resolve the Year 2000 issue involves the following four 
phases: assessment, remediation, testing and implementation.  The Company has 
assembled an internal project team that is in the process of assessing all 
systems that could be significantly affected by the Year 2000 issue.  Results 
of this assessment indicated that some of the Company's significant 
information technology systems could be affected.  The assessment also 
indicated that software and hardware (embedded chips) used in production and 
manufacturing systems (hereafter also referred to as operating equipment) may 
also be at risk.  In addition, based on a review of its product lines, the 
Company has determined that most of the products it has sold and will continue 
to sell do not require remediation to be Year 2000 compliant.  Accordingly, 
the Company does not believe that the Year 2000 issue presents a material 
exposure as it relates to the Company's products.  The internal project team 
is contacting each of the Company's significant customers and suppliers and 
requesting that they apprize the Company of the status of their Year 2000 
compliance programs.  The Company has targeted the beginning of the second 
quarter of 1999 as the date for receiving substantially all customer and 
supplier responses.  There can be no assurance as to when this process will be 
completed.

For its information technology exposures, to date the Company has completed a 
majority of the remediation phase and expects to complete software 
modification and replacement no later than June 30, 1999.  Once software is 
modified or replaced for a system, the Company begins testing and 
implementation.  The testing and implementation phases for all significant 
systems are expected to be completed by September 30, 1999.  The four phases 
of the Company's Year 2000 program in relation to operating equipment is 
on-going and expected to be completed by December 31, 1999.

Cost.  The Company will utilize both internal and external resources to 
reprogram or replace, test, and implement the software and operating equipment 
for Year 2000 modifications.  The total cost of the Year 2000 project is 
estimated at $3.1 million and is being funded through operating cash flows and 
capital leases.  To date, the Company has incurred approximately $2.3 million 
related to all phases of the Year 2000 project.  The majority of these costs 
have been capitalized as they relate to new software and equipment.


<PAGE>


Risks.  Management of the Company believes it has an effective program in 
place to resolve the Year 2000 issue in a timely manner.  As noted above, the 
Company has not yet completed all necessary phases of the Year 2000 program.  
In the event that the Company does not complete any additional phases, the 
Company could be materially adversely affected.  In addition, disruptions in 
the economy generally resulting from the Year 2000 issue could also materially 
adversely affect the Company.  The amount of potential liability and lost 
revenue cannot be reasonably estimated at this time.

Contingency Plans.  The Company is in the process of developing a contingency 
plan in the event it does not complete all phases of the Year 2000 program.  
The Company expects to have the contingency plan completed by the end of 1999.

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not engage in hedging or other market structure derivative 
trading activities.  Additionally, the Company's debt obligations are 
primarily fixed-rate in nature and, as such, are not sensitive to changes in 
interest rates.  At March 31, 1999 the Company does have variable rate debt 
outstanding of $36.0 million.  A one percentage point increase in interest 
rates would increase the amount of annual interest paid by approximately $0.4 
million.  The Company does not believe that its market risk financial 
instruments on March 31, 1999 would have a material effect on future 
operations or cash flow.


<PAGE>



PART II.  OTHER INFORMATION



Item 1.   LEGAL PROCEEDINGS
          None


Item 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS
          None


Item 3.   DEFAULTS UPON SENIOR SECURITIES
          None


Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          None


Item 5.   OTHER INFORMATION
          None


Item 6.   EXHIBITS AND REPORTS ON FORM 8-K
          
          1)  27. EDGAR Financial Data Schedule



<PAGE>


                                    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.


                                   MOTORS AND GEARS, INC.



                                   By: /s/ Norman R. Bates
                                       Norman R. Bates
                                       Chief Financial Officer


May 13, 1999