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 September 30, 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
November 12, 1999:  100,000.


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                           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 September 30, 1999,
and December 31, 1998                                               4

Condensed Consolidated Statements of Income for the
three and nine months ended September 30, 1999 and 1998             5

Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 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)



                                                September 30,  December 31,
                                                    1999          1998
                                                        (Unaudited)

ASSETS
Current Assets:
 Cash and cash equivalents                      $  7,490        $   7,016
 Accounts receivable, net                         59,719           51,969
 Inventories                                      41,825           43,318
 Prepaid expenses and other current assets         2,281            3,058
     Total Current Assets                        111,315          105,361

 Property, plant, and equipment, net              21,878           22,268
 Goodwill, net                                   226,081          232,058
 Deferred financing costs, net                    12,839           14,182
 Deferred income taxes                             4,436            4,868
 Investment in affiliate                           7,285            7,285
 Other assets, net                                 2,247            2,799
     Total Assets                               $386,081         $388,821

LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
 Accounts payable                               $ 21,566          $ 23,832
 Accrued interest payable                         12,077             4,756
 Accrued expenses and other current liabilities   12,648             7,274
 Due to affiliated company                           319             1,216
 Current portion of long term debt                   344               361
     Total Current Liabilities                    46,954            37,439

Long-term debt                                   310,123           325,455
Other non-current liabilities                      3,791             3,314

Shareholder's Equity:
 Common stock                                          1                 1
 Additional paid-in-capital                       50,005            50,005
 Accumulated other comprehensive income/(loss)    (3,598)            1,947
 Accumulated deficit                             (21,195)          (29,340)
     Total Shareholder's Equity                   25,213            22,613
     Total Liabilities and Shareholder's Equity $386,081          $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   Nine Months Ended
                                      September 30,        September 30,
                                    1999         1998    1999         1998

Net sales                           $78,579    $78,038   $232,973   $208,304
Cost of sales, excluding
   depreciation                      49,773     50,658    148,329    135,310
Selling, general and
   administrative expenses           11,190      9,943     31,639     26,711
Depreciation                          1,486      1,513      4,171      4,074
Amortization of goodwill
   and other intangibles              2,258      2,220      6,787      6,043
Management fees and other               786        890      2,326      2,323

     Operating Income                13,086     12,814     39,721     33,843

Other (income)/expense:
   Interest expense                   8,422      8,461     25,427     24,521
   Interest income                      (79)       (66)      (228)      (688)
   Miscellaneous, net                   (70)        -        (287)       -

Income before income taxes            4,813      4,419     14,809     10,010

Provision for income taxes            2,166      1,970      6,664      4,498

     Net Income                     $ 2,647    $ 2,449   $  8,145    $ 5,512










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)


                                                      Nine Months Ended
                                                        September 30,
                                                       1999       1998
Cash flows from operating activities:
 Net income                                           $ 8,145    $ 5,512
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Depreciation and amortization                       11,926     11,089
   Provision for deferred income taxes                  1,103        879

Changes in operating assets and liabilities net
 of effects from acquisitions:
   Current assets                                      (5,480)   (13,127)
   Current liabilities                                 10,429      9,381
   Non-current assets & liabilities                      (297)        24
   Payables to affiliated company                        (897)       885
   Net cash provided by operating activities           24,929     14,643

Cash flows from investing activities:
   Capital expenditures, net                           (3,012)    (3,777)
   Contingent purchase price and acquisition of
    subsidiaries                                       (3,401)   (55,906)
   Cash acquired in acquisition of subsidiaries             -        360
   Net cash used in investing activities               (6,413)   (59,323)

Cash flows from financing activities:
   Proceeds from revolving credit facility             12,000    40,000
   Repayment of borrowings under revolving
    credit facility and other long-term debt          (28,235)  (17,170)
   Net cash (used in)/provided by financing
    activities                                        (16,235)   22,830

Effect of exchange rate changes on cash                (1,807)     (541)

Net increase (decrease) in cash and
  cash equivalents                                        474   (22,391)

Cash and cash equivalents at beginning of period        7,016    28,880
Cash and cash equivalents at end of period            $ 7,490   $ 6,489






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:
                                    September 30,      December 31,
                                       1999             1998

     Raw materials                    $25,638            $27,101
     Work in process                   11,465             10,626
     Finished goods                     4,722              5,591
                                      $41,825            $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
$58,901.  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 $44,857.  The Company also has a remaining contingent
purchase price agreement of up to approximately $2,700 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.

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

<PAGE>

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 three and nine months
ended September 30, 1998 as if the 1998 acquisitions had occurred on January
1, 1998 is as follows:

                              Three Months Ended    Nine Months Ended
                              September 30, 1998    September 30, 1998

     Net sales                       $78,872              $227,734
     Income before income taxes        4,460                14,070
     Net income                        2,453                 7,738

5.Comprehensive Income

Total comprehensive income for the three and nine months ended September 30,
1999 and 1998 is as follows:

                                    Three Months Ended   Nine Months Ended
                                       September 30,       September 30,
                                     1999        1998     1999       1998

Net Income                         $ 2,647     $ 2,449   $ 8,145   $ 5,512
     Foreign currency
       translation adjustment          508         519    (5,545)   (1,872)
     Comprehensive income          $ 3,155     $ 2,968   $ 2,600   $ 3,640

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    Nine Months Ended
                                     September 30,      September 30,
                                   1999      1998       1999       1998
                                               (Unaudited)
                                      (Dollar amounts in thousands)
Net sales
  Motors                         $58,945   $61,886     $180,804   $160,625
  Controls                        19,634    16,152       52,169     47,679
                                  78,579    78,038      232,973    208,304
Operating income
  Motors                          12,909    12,991       40,207     33,916
  Controls                         2,401     2,050        6,243      6,086
                                  15,310    15,041       46,450     40,002
Management fees and unallocated
 corporate overhead                2,224     2,227        6,729      6,159
Total operating income            13,086    12,814       39,721     33,843

Interest expense                   8,422     8,461       25,427     24,521
Interest income and other           (149)      (66)        (515)      (688)
Income before income taxes       $ 4,813   $ 4,419     $ 14,809   $ 10,010

Consolidated Results of Operations - Third quarter and first nine months of
1999 compared with third quarter and first nine months of 1998.

Net sales for the third quarter of 1999 increased approximately 1% over last
year to $78.6 million.  Net sales for the first nine months of 1999 grew to
$233.0 million, an increase of 12% or $24.7 million over 1998.  The strong
sales growth for the first nine months was primarily driven by the two
acquisitions in 1998, which accounted for $22.5 million of the growth.
Subfractional motor sales decreased 14% in the third quarter as compared to
1998 primarily due to weakness in the vending markets.  Significant
difficulties in international markets of a major beverage company are the
primary reason for this decline.  Subfractional motor sales for the first nine
months decreased 3%, once again, driven by the weakness in the vending market
described above.  Sales of fractional/integral products, including 1998
acquisitions, increased 3% in the third quarter and 27% for the first nine
months compared with last year.  The growth for fractional/integral products
in the third quarter was driven by strong performance in material handling,
elevator, and floor care markets offset partially by a weak European market
and an unfavorable Euro exchange rate.  Fractional/integral product sales
growth for the first nine months was driven primarily by the 1998 acquisitions
and to a lesser extent, the strong performance in the material handling,
elevator, and floor care markets.  Sales of electronic motion control systems
increased 21.6% and 9.4% in the third quarter and first nine months of 1999,
respectively, over the same periods for 1998.  These increases in the
electronic motion control systems sales were mainly attributed to continued
strength in the elevator modernization market.

Gross margins (excluding depreciation) increased from 35.1% to 36.7% for the
three months ended September 30, 1998 and 1999, respectively, and from 35.0%
to 36.3% for the nine months ended September 30, 1998 and 1999, respectively.
These increases were predominantly driven by the effects of the 1998
acquisitions and a change in product mix of subfractional motor sales.
Operating income for the third quarter of 1999 increased slightly to $13.1
million, and for the first nine months increased 17% to $39.7 million, over
the same periods for 1998.  The increase in operating income was primarily the

<PAGE>

result of the increased sales described above, coupled with improved operating
margins on subfractional and fractional/integral motor sales.  Operating
margins increased from 16.4% to 16.7% for the three months ended September 30,
1998 and 1999, respectively, and from 16.2% to 17.0% for the nine months ended
September 30, 1998 and 1999, respectively.  On a year to date basis, increased
operating income resulting from the increased sales and improved margins
described above was partially offset by an increase in corporate expenses.

Interest expense increased $0.9 million from $24.5 million for the first nine
months of 1998 to $25.4 million for the first nine months of 1999, reflecting
higher debt levels related to the financing of new acquisitions.

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 nine
months ended September 30, 1999 was $24.9 million, compared to $14.6 million
provided from operating activities for the nine months ended September 30,
1998.  An increase in net income, primarily due to the 1998 acquisitions, and
improved working capital performance during the first nine months of 1999 are
the main factors contributing to the increase in cash flow from operating
activities.

Investing activities.  In the first nine months 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.

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.

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
purposes. 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 November 12, 1999, the Company has
approximately $52.4  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 determined it was required to modify or
replace significant portions of its software and certain hardware so that
those systems would properly utilize dates beyond December 31, 1999.  The
Company presently believes that with modifications and replacements made to
date of software and certain hardware, the Year 2000 issue has been
mitigated.

The Company's plan to resolve the Year 2000 issue involved the following four
phases: assessment, remediation, testing and implementation.  The Company
assembled an internal project team that assessed all systems that could have
been significantly affected by the Year 2000 issue.  Results of this
assessment indicated that some of the Company's significant information
technology systems were affected.  The assessment also indicated that some
software and hardware (embedded chips) used in production and manufacturing
systems (hereafter also referred to as operating equipment) had been at risk.
In addition, based on a review of its product lines, the Company determined
that substantially all of the products it has sold and will continue to sell
did 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 contacted
each of the Company's significant suppliers and requested that they apprize
the Company of the status of their Year 2000 compliance programs.  The Company
has received responses from its significant suppliers and continues to monitor
their compliance.

The four phases of the Company's Year 2000 program were completed by October
31, 1999.

Cost.  The Company utilized 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 was approximately
$3.3 million and was funded through operating cash flows and capital leases.
The majority of these costs have been capitalized as they relate to new
software and equipment.

Risks.  Management of the Company believes the replacements and modifications
performed have resolved the Year 2000 issue as it relates to the Company.
However, disruptions in the economy generally resulting from the Year 2000
issue could materially adversely affect the Company.  The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.

Contingency Plans.  The Company's completion of all phases of its Year 2000
program has mitigated risks associated with the Year 2000 issue.  The Company
will continue to evaluate the need for a contingency plan regarding supplier
compliance.


<PAGE>

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 September 30, 1999 the Company does have variable rate
debt outstanding of $25.0 million.  A one percentage point increase in
interest rates would increase the amount of annual interest paid by
approximately $0.3 million.  The Company does not believe that its market risk
financial instruments on September 30, 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


November 12, 1999