**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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





**For
      the quarter ended June 30, 2008**





**OR**





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




**For
      the transition period from________to ________**





**Commission
      file number: 001** - **13337**




**STONERIDGE,
      INC.**


*(Exact
      name of registrant as specified in its charter)*




**Ohio**
            
            **34-1598949**(*State
                or other jurisdiction of*
            
            *(I.R.S.
                Employer**incorporation
                or
                organization)*
            
            *Identification
                No.)***9400
                East Market Street, Warren,
                Ohio**
            
            **44484***(Address
                of principal executive
                offices)*
            
            *(Zip
                Code)*




**(330)
                856-2443**Registrant’s
                telephone number,
                including area code




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. x Yes o No




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):




Large accelerated filer o
            Accelerated filer x
            Non-accelerated filer o
            Smaller reporting company o(Do
                not check if a smaller reporting
                company)




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). o Yes x No




The
      number of Common Shares, without par value, outstanding as of July 25, 2008
      was 24,668,595.







**STONERIDGE,
        INC. AND SUBSIDIARIES**


**INDEX****PART
                I-FINANCIAL INFORMATION**
            **Page
                No.**Item
                1.
            Financial
                StatementsCondensed
                Consolidated Balance Sheets (Unaudited) as of June 30, 2008 and December
                31, 2007
            2Condensed
                Consolidated Statements of Operations(Unaudited)
                For the Three and Six Months Ended June 30, 2008 andJune
                30, 2007
            3Condensed
                Consolidated Statements of Cash Flows (Unaudited) For the Six Months
                Ended
                June 30, 2008 and June 30, 2007
            4Notes
                to Condensed Consolidated Financial Statements (Unaudited)
            5Item
                2.
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            21Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            30Item
                4.
            Controls
                and Procedures
            31**PART
                II-OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            32Item
                1A.
            Risk
                Factors
            32Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            32Item
                3.
            Defaults
                Upon Senior Securities
            32Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            32Item
                5.
            Other
                Information
            32Item
                6.
            Exhibits
            32Signatures
            
            33Index
                to Exhibits
            34




1


**PART
        I-FINANCIAL INFORMATION**





**Item
      1. Financial Statements.**





**STONERIDGE,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(Unaudited)**


**(in
      thousands)**


**June
                  30,**
              
              **December
                  31,****2008**
              
              **2007**ASSETSCurrent
                  Assets:Cash
                  and cash equivalents
              
              $
              81,342
              
              $
              95,924Accounts
                  receivable, less reserves of $5,587 and $4,736,
                  respectively
              
              
              142,472
              
              
              122,288Inventories,
                  net
              
              
              70,175
              
              
              57,392Prepaid
                  expenses and other
              
              
              17,365
              
              
              15,926Deferred
                  income taxes
              
              
              9,963
              
              
              9,829Total
                  current assets
              
              
              321,317
              
              
              301,359Long-Term
                  Assets:Property,
                  plant and equipment, net
              
              
              90,611
              
              
              92,752Other
                  Assets:Goodwill
              
              
              65,730
              
              
              65,176Investments
                  and other, net
              
              
              47,962
              
              
              39,454Deferred
                  income taxes
              
              
              20,774
              
              
              29,028Total
                  long-term assets
              
              
              225,077
              
              
              226,410Total
                  Assets
              
              $
              546,394
              
              $
              527,769LIABILITIES
                  AND SHAREHOLDERS’ EQUITYCurrent
                  Liabilities:Accounts
                  payable
              
              $
              76,809
              
              $
              69,373Accrued
                  expenses and other
              
              
              56,104
              
              
              47,198Total
                  current liabilities
              
              
              132,913
              
              
              116,571Long-Term
                  Liabilities:Long-term
                  debt
              
              
              183,000
              
              
              200,000Deferred
                  income taxes
              
              
              2,909
              
              
              2,665Other
                  liabilities
              
              
              2,168
              
              
              2,344Total
                  long-term liabilities
              
              
              188,077
              
              
              205,009Shareholders'
                  Equity:Preferred
                  Shares, without par value, authorized 5,000 shares, none
                  issued
              
              
              -
              
              
              -Common
                  Shares, without par value, authorized 60,000 shares, issued 24,755
                  and
                  24,601shares
                  and outstanding 24,660 and 24,209 shares, respectively, with no
                  stated
                  value
              
              
              -
              
              
              -Additional
                  paid-in capital
              
              
              156,467
              
              
              154,173Common
                  Shares held in treasury, 95 and 373 shares, respectively, at
                  cost
              
              
              (129
              )
              
              (383
              )Retained
                  earnings
              
              
              49,603
              
              
              38,372Accumulated
                  other comprehensive income
              
              
              19,463
              
              
              14,027Total
                  shareholders’ equity
              
              
              225,404
              
              
              206,189Total
                  Liabilities and Shareholders' Equity
              
              $
              546,394
              
              $
              527,769




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




2


**STONERIDGE,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(Unaudited)**


**(in
      thousands, except per share data)**


**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  Sales
              
              $
              213,229
              
              $
              183,802
              
              $
              416,299
              
              $
              368,830Costs
                  and Expenses:Cost
                  of goods sold
              
              
              163,875
              
              
              144,920
              
              
              315,128
              
              
              287,101Selling,
                  general and administrative
              
              
              36,731
              
              
              33,598
              
              
              73,021
              
              
              66,730(Gain)
                  Loss on sale of property, plant and equipment, net
              
              
              153
              
              
              (1,653
              )
              
              145
              
              
              (1,688
              )Restructuring
                  charges
              
              
              1,713
              
              
              31
              
              
              3,135
              
              
              72Operating
                  Income
              
              
              10,757
              
              
              6,906
              
              
              24,870
              
              
              16,615Interest
                  expense, net
              
              
              4,880
              
              
              5,619
              
              
              10,252
              
              
              11,103Equity
                  in earnings of investees
              
              
              (3,016
              )
              
              (2,298
              )
              
              (6,835
              )
              
              (4,418
              )Loss
                  on early extinguishment of debt
              
              
              271
              
              
              -
              
              
              770
              
              
              -Other
                  expense (income), net
              
              
              (124
              )
              
              224
              
              
              278
              
              
              512Income
                  Before Income Taxes
              
              
              8,746
              
              
              3,361
              
              
              20,405
              
              
              9,418Provision
                  for income taxes
              
              
              4,062
              
              
              666
              
              
              9,174
              
              
              1,853Net
                  Income
              
              $
              4,684
              
              $
              2,695
              
              $
              11,231
              
              $
              7,565Basic
                  net income per share
              
              $
              0.20
              
              $
              0.12
              
              $
              0.48
              
              $
              0.33Basic
                  weighted average shares outstanding
              
              
              23,286
              
              
              23,114
              
              
              23,327
              
              
              23,052Diluted
                  net income per share
              
              $
              0.20
              
              $
              0.11
              
              $
              0.47
              
              $
              0.32Diluted
                  weighted average shares outstanding
              
              
              23,690
              
              
              23,702
              
              
              23,722
              
              
              23,603





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




3




**STONERIDGE,
      INC. AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


**(in
      thousands)**




**Six
                  Months Ended****June
                  30,****2008**
              
              **2007**OPERATING
                  ACTIVITIES:Net
                  income
              
              $
              11,231
              
              $
              7,565Adjustments
                  to reconcile net income to net cash provided by (used for)operating
                  activities -Depreciation
              
              
              14,316
              
              
              14,513Amortization
              
              
              784
              
              
              799Deferred
                  income taxes
              
              
              7,281
              
              
              (325
              )Equity
                  in earnings of investees
              
              
              (6,835
              )
              
              (4,418
              )(Gain)
                  Loss on sale of property, plant and equipment
              
              
              145
              
              
              (1,688
              )Share-based
                  compensation expense
              
              
              1,903
              
              
              1,252Changes
                  in operating assets and liabilities -Accounts
                  receivable, net
              
              
              (17,924
              )
              
              (6,506
              )Inventories,
                  net
              
              
              (11,739
              )
              
              1,538Prepaid
                  expenses and other
              
              
              (625
              )
              
              (3,916
              )Accounts
                  payable
              
              
              6,081
              
              
              (6,112
              )Accrued
                  expenses and other
              
              
              7,956
              
              
              1,317Net
                  cash provided by operating activities
              
              
              12,574
              
              
              4,019INVESTING
                  ACTIVITIES:Capital
                  expenditures
              
              
              (11,641
              )
              
              (10,814
              )Proceeds
                  from sale of property, plant and equipment
              
              
              307
              
              
              4,951Business
                  acquisitions and other
              
              
              (980
              )
              
              -Net
                  cash used for investing activities
              
              
              (12,314
              )
              
              (5,863
              )FINANCING
                  ACTIVITIES:Repayments
                  of long-term debt
              
              
              (17,000
              )
              
              -Share-based
                  compensation activity, net
              
              
              1,162
              
              
              1,796Premiums
                  related to early extinguishment of debt
              
              
              (553
              )
              
              -Net
                  cash provided by (used for) financing activities
              
              
              (16,391
              )
              
              1,796Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              1,549
              
              
              232Net
                  change in cash and cash equivalents
              
              
              (14,582
              )
              
              184Cash
                  and cash equivalents at beginning of period
              
              
              95,924
              
              
              65,882Cash
                  and cash equivalents at end of period
              
              $
              81,342
              
              $
              66,066


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




4


**STONERIDGE,
      INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**


**(in
      thousands, except share and per share data, unless otherwise
      indicated)**


**(1)
      Basis of Presentation**





The
      accompanying condensed consolidated financial statements have been prepared
      by
      Stoneridge, Inc. (the “Company”) without audit, pursuant to the rules and
      regulations of the Securities and Exchange Commission (the “Commission”). The
      information furnished in the condensed consolidated financial statements
      includes normal recurring adjustments and reflects all adjustments, which are,
      in the opinion of management, necessary for a fair presentation of such
      financial statements. Certain information and footnote disclosures normally
      included in financial statements prepared in accordance with U.S. generally
      accepted accounting principles have been condensed or omitted pursuant to the
      Commission’s rules and regulations. The results of operations for the six months
      ended June 30, 2008 are not necessarily indicative of the results to be expected
      for the full year.





Although
      the Company believes that the disclosures are adequate to make the information
      presented not misleading, it is suggested that these condensed consolidated
      financial statements be read in conjunction with the audited consolidated
      financial statements and the notes thereto included in the Company’s Form 10-K
      for the fiscal year ended December 31, 2007.





The
      Company has reclassified the presentation of certain prior-period information
      to
      conform to the current presentation.





**(2)
      Inventories**





Inventories
      are valued at the lower of cost or market. Cost is determined by the last-in,
      first-out (“LIFO”) method for approximately 62% and 66% of the Company’s
      inventories at June 30, 2008 and December 31, 2007, respectively, and by the
      first-in, first-out (“FIFO”) method for all other inventories. Inventory cost
      includes material, labor and overhead. Inventories consist of the
      following:


**June
                  30,**
              
              **December
                  31,****2008**
              
              **2007**Raw
                  materials
              
              $
              39,138
              
              $
              36,678Work-in-progress
              
              
              10,605
              
              
              9,065Finished
                  goods
              
              
              22,857
              
              
              13,700Total
                  inventories
              
              
              72,600
              
              
              59,443Less:
                  LIFO reserve
              
              
              (2,425
              )
              
              (2,051
              )Inventories,
                  net
              
              $
              70,175
              
              $
              57,392




**(** **3** **)
        Fair Value of Financial Instruments**




***Financial
      Instruments***





A
      financial instrument is cash or a contract that imposes an obligation to
      deliver, or conveys a right to receive cash or another financial instrument.
      The
      carrying values of cash and cash equivalents, accounts receivable and accounts
      payable are considered to be representative of fair value because of the short
      maturity of these instruments. The estimated fair value of the Company’s senior
      notes (fixed rate debt) at June 30, 2008 and December 31, 2007, per quoted
      market sources, was $186.7 million and $199.2 million, respectively. The
      carrying value was $183.0 million and $200.0 million as of June 30, 2008 and
      December 31, 2007, respectively.





***Derivative
      Instruments and Hedging Activities***





The
      Company makes use of derivative instruments in foreign exchange and commodity
      price hedging programs. Derivatives currently in use are foreign currency
      forward and commodity swap contracts. These contracts are used strictly for
      hedging and not for speculative purposes. Management believes that the use
      of
      these instruments to reduce risk is in the Company’s best interest.




5


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**




As
      a
      result of the Company’s international business presence it is exposed to foreign
      currency exchange risk. The Company uses derivative financial instruments,
      including foreign currency forward contracts, to mitigate its exposure to
      fluctuations in foreign currency exchange rates by reducing the effect of such
      fluctuations on foreign currency denominated intercompany transactions and
      other
      known foreign currency exposures. The principal currency hedged by the Company
      is the British pound. In certain instances, the foreign currency forward
      contracts are marked to market, with gains and losses recognized in the
      Company’s condensed consolidated statement of operations as a component of other
      income. The Company’s foreign currency forward contracts substantially offset
      gains and losses on the underlying foreign currency denominated transactions.





The
      Company’s foreign currency forward contracts had a notional value of $8,239 and
      $8,551 at June 30, 2008 and December 31, 2007, respectively. As of June 30,
      2008, the purpose of the foreign currency forward contracts is to reduce the
      risk of exposure related to the Company’s British pound-denominated receivables.
      At December 31, 2007, the Company also used forward currency contracts to reduce
      the risk of exposure related to the Company’s Mexican peso- and Swedish
      krona-denominated receivables. The estimated fair value of the existing
      contracts at June 30, 2008 and December 31, 2007, per quoted market sources,
      was
      approximately $124 and $(28), respectively. For the six months ended June 30,
      2008, the Company recognized a $30 loss related to these contracts in the
      condensed consolidated statement of operations as a component of other expense
      (income), net. In 2007, the Company used foreign currency option contracts
      to
      reduce the risk of exposures to the Mexican peso. The Company’s foreign currency
      option contracts expired as of December 31, 2007.





To
      mitigate the risk of future price volatility and, consequently, fluctuations
      in
      gross margins, the Company has entered into fixed price commodity swaps with
      a
      bank to fix the cost of a portion of its copper purchases. We entered into
      fixed
      price swap contracts for 480 and 420 metric tonnes of copper in December 2006
      and January 2007, respectively. These contracts fixed the cost of copper
      purchases in 2007 and expired on December 31, 2007. In December 2007, we entered
      into a fixed price swap contract for 1.0 million pounds of copper, which will
      last through December 2008. Because these contracts were executed to hedge
      forecasted transactions, the contracts are accounted for as cash flow hedges.
      The unrealized gain or loss for the effective portion of the hedge is deferred
      and reported in the Company’s condensed consolidated balance sheets as a
      component of accumulated other comprehensive income. The Company deems these
      cash flow hedges to be highly effective. The effectiveness of the transactions
      has been and will be measured on an ongoing basis using regression analysis.
      The
      fair value of the fixed price commodity swap contract, per quoted market
      sources, was approximately $486 and $57 at June 30, 2008 and December 31, 2007,
      respectively. For the six months ended June 30, 2008, the Company recognized
      a
      $382 gain related to these contracts in the condensed consolidated statement
      of
      operations as a component of cost of goods sold.





***Statement
      of Financial Accounting Standard No. 157, Fair Value
      Measurements***




Effective
      January 1, 2008, we adopted Statement
      of Financial Accounting Standard (“SFAS”)
      No. 157, *Fair
      Value Measurements* (“SFAS
      157”). SFAS 157 clarifies the definition of fair value, prescribes methods
      for measuring fair value, establishes a fair value hierarchy based on the inputs
      used to measure fair value and expands disclosures about the use of fair value
      measurements. In accordance with Financial Accounting Standards Board Staff
      Position No. FAS 157-2, *Effective
      Date of FASB Statement No. 157,* we will
      defer the adoption of SFAS 157 for our nonfinancial assets and nonfinancial
      liabilities until January 1, 2009 which is not expected to have a material
      impact on the Company’s financial statements.





The
      following table presents our assets that are measured at fair value on a
      recurring basis and are categorized using the fair value hierarchy. As of June
      30, 2008 the Company does not have liabilities that are measured at fair value.
      The fair value hierarchy has three levels based on the reliability of the inputs
      used to determine fair value.




**Fair
                  Value Measurements at June 30, 2008****Quoted
                  Prices**
              
              **Significant
                  Other**
              
              **Significant****in
                  Active Markets**
              
              **Observable**
              
              **Unobservable****for
                  Identical Assets**
              
              **Inputs**
              
              **Inputs****Assets**
              
              **Total**
              
              **(Level
                  1)**
              
              **(Level
                  2)**
              
              **(Level
                  3)**Available-for-sale
                  equity investments
              
              $
              249
              
              $
              249
              
              $
              -
              
              $
              -Derivatives
              
              
              610
              
              
              -
              
              
              610
              
              
              -Total
              
              $
              859
              
              $
              249
              
              $
              610
              
              $
              -


6




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**




Equity
      investments are valued using a market approach based on the quoted market prices
      of identical instruments when available or other observable inputs such as
      trading prices of identical instruments in active markets.  Our
      foreign currency forward contracts are valued using an income approach based
      on
      the present value of the forward rate less the contract rate multiplied by
      the
      notional amount. Commodity swaps are valued using an income approach based
      on
      the present value of the commodity index prices less the contract rate
      multiplied by the notional amount.




**(4** **)
      Share-Based Compensation**





Total
      compensation expense recognized in the condensed
      consolidated statements of operations for
      share-based compensation arrangements was $822 and $665 for the three
      months ended June 30, 2008 and 2007, respectively. For
      the
      six months ended June 30, 2008 and 2007, total compensation expense recognized
      in the condensed consolidated statements of operations for share-based
      compensation arrangements was $1,903 and $1,252, respectively.





**(5** **)
      Comprehensive Income (Loss)**





SFAS
      No.
      130, *Reporting
      Comprehensive Income* ,
      establishes standards for the reporting and disclosure of comprehensive
      income.





The
      components of comprehensive income, net of tax are as follows:




**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Net
                  income
              
              $
              4,684
              
              $
              2,695
              
              $
              11,231
              
              $
              7,565Other
                  comprehensive income:Currency
                  translation adjustments
              
              
              1,294
              
              
              1,533
              
              
              5,110
              
              
              1,982Pension
                  and postretirement liability adjustments
              
              
              (1
              )
              
              (28
              )
              
              (10
              )
              
              (36
              )Unrealized
                  gain (loss) on marketable securities
              
              
              5
              
              
              10
              
              
              (12
              )
              
              61Unrecognized
                  gain (loss) on derivatives
              
              
              (170
              )
              
              629
              
              
              348
              
              
              1,101Total
                  other comprehensive income
              
              
              1,128
              
              
              2,144
              
              
              5,436
              
              
              3,108Comprehensive
                  income
              
              $
              5,812
              
              $
              4,839
              
              $
              16,667
              
              $
              10,673




Accumulated
      other comprehensive income, net of tax is comprised of the
      following:




**June
                  30,**
              
              **December
                  31,****2008**
              
              **2007**Foreign
                  currency translation adjustments
              
              $
              19,622
              
              $
              14,512Pension
                  and postretirement liability adjustments
              
              
              (438
              )
              
              (428
              )Unrealized
                  loss on marketable securities
              
              
              (32
              )
              
              (20
              )Unrecognized
                  gain (loss) on derivatives
              
              
              311
              
              
              (37
              )Accumulated
                  other comprehensive income
              
              $
              19,463
              
              $
              14,027




7


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


**(6)
      Long-Term Debt**





***Senior
      Notes***





The
      Company had $183.0 million and $200.0 million of senior notes outstanding at
      June 30, 2008 and December 31, 2007, respectively. During the first half of
      2008, the Company repurchased and retired $17.0 million in face value of the
      senior notes. The outstanding senior notes bear interest at an annual rate
      of
      11.50% and mature on May 1, 2012. The senior notes are redeemable, at the
      Company’s option, at 103.833 until April 30, 2009. The senior notes will remain
      redeemable at various levels until the maturity date. Interest is payable on
      May
      1 and November 1 of each year.





***Credit
      Facility***





On
      November 2, 2007, the Company entered into an asset-based credit facility,
      which
      permits borrowing up to a maximum level of $100.0 million. At June 30, 2008,
      there were no borrowings on this asset-based credit facility. The available
      borrowing capacity on this credit facility is based on eligible current assets,
      as defined. At June 30, 2008, the Company had borrowing capacity of $90.9
      million based on eligible current assets. The asset-based credit facility does
      not contain financial performance covenants; however, restrictions include
      limits on capital expenditures, operating leases and dividends. The asset-based
      credit facility expires on November 1, 2011, and requires a commitment fee
      of
      0.25% on the unused balance. Interest is payable quarterly at either (i) the
      higher of the prime rate or the Federal Funds rate plus 0.50%, plus a margin
      of
      0.00% to 0.25% or (ii) LIBOR plus a margin of 1.00% to 1.75%, depending upon
      the
      Company’s undrawn availability, as defined.








**(7)
      Net Income Per Share**





Basic
      net
      income per share was computed by dividing net income by the weighted-average
      number of Common Shares outstanding for each respective period. Diluted net
      income per share was calculated by dividing net income by the weighted-average
      of all potentially dilutive Common Shares that were outstanding during the
      periods presented.





Actual
      weighted-average shares outstanding used in calculating basic and diluted net
      income per share are as follows:


**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Basic
                  weighted-average shares outstanding
              
              
              23,285,848
              
              
              23,113,827
              
              
              23,327,024
              
              
              23,051,721Effect
                  of dilutive securities
              
              
              403,988
              
              
              588,522
              
              
              394,793
              
              
              551,096Diluted
                  weighted-average shares outstanding
              
              
              23,689,836
              
              
              23,702,349
              
              
              23,721,817
              
              
              23,602,817




For
      the
      three months ended June 30, 2008 and 2007, options to purchase 50,000 and
      234,000 Common Shares at an average price of $15.73 and $16.71, respectively,
      were not included in the computation of diluted net income per share because
      their respective exercise prices were greater than the average market price
      of
      Common Shares and, therefore, their effect would have been anti-dilutive. Share
      options not included in the computation of diluted net income per share to
      purchase 61,000 and 260,000 Common Shares at an average price of $15.22 and
      $16.20, respectively, were outstanding during the six months ended June 30,
      2008
      and 2007, respectively.





As
      of
      June 30, 2008, 628,275 performance-based restricted shares were outstanding.
      These shares were not included in the computation of diluted net income per
      share because not all vesting conditions were achieved as of June 30, 2008.
      These shares may or may not become dilutive based on the Company’s ability to
      exceed future earnings thresholds.




8




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


**(8)
      Restructuring**





In
      January 2005, the Company announced restructuring initiatives related to the
      rationalization of certain manufacturing facilities in Europe and North America.
      These restructuring initiatives were completed in 2007.





On
      October 29, 2007, the Company announced restructuring initiatives to improve
      manufacturing efficiency and cost position by ceasing manufacturing operations
      at its Sarasota, Florida, and Mitcheldean, United Kingdom, locations. These
      rationalizations are part of the Company’s cost reduction initiatives. In
      connection with these initiatives, the Company recorded restructuring charges
      of
      $3,657 for the three months ended June 30, 2008. Restructuring charges for
      the
      six months ended June 30, 2008 were $6,177. Restructuring expenses that were
      general and administrative in nature were included in the Company’s condensed
      consolidated statements of operations as restructuring charges, while the
      remaining restructuring related expenses were included in cost of goods
      sold.





The
      charges related to the restructuring initiatives announced on October 29, 2007
      that belong to the Electronics reportable segment included the
      following:


**Severance**
                **Costs**
              
              **Contract**
                **Termination**
                **Costs**
              
              **Other**
                **Associated**
                **Costs**
              
              **Total**Total
                  expected restructuring charges
              
              $
              3,454
              
              $
              978
              
              $
              5,385
              
              $
              9,817Fourth
                  quarter 2007 charge to expense
              
              $
              468
              
              $
              -
              
              $
              103
              
              $
              571Cash
                  payments
              
              
              -
              
              
              -
              
              
              (103
              )
              
              (103
              )Accrued
                  balance at December 31, 2007
              
              
              468
              
              
              -
              
              
              -
              
              
              468First
                  quarter 2008 charge to expense
              
              
              873
              
              
              -
              
              
              614
              
              
              1,487Second
                  quarter 2008 charge to expense
              
              
              819
              
              
              -
              
              
              822
              
              
              1,641Cash
                  Payments
              
              
              -
              
              
              -
              
              
              (1,307
              )
              
              (1,307
              )Accrued
                  balance at June 30, 2008
              
              $
              2,160
              
              $
              -
              
              $
              129
              
              $
              2,289Remaining
                  expected restructuring charge
              
              $
              1,294
              
              $
              978
              
              $
              3,846
              
              $
              6,118




The
      charges related to the restructuring initiatives announced on October 29, 2007
      that belong to the Control Devices reportable segment included the
      following:




**Severance**
                **Costs**
              
              **Fixed-Asset**
                **Costs**
              
              **Other**
                **A****ssociated**
                **Costs**
              
              **Total
                  (A)**Total
                  expected restructuring charges
              
              $
              1,857
              
              $
              296
              
              $
              4,483
              
              $
              6,636Fourth
                  quarter 2007 charge to expense
              
              $
              357
              
              $
              -
              
              $
              99
              
              $
              456Cash
                  payments
              
              
              -
              
              
              -
              
              
              -
              
              
              -Accrued
                  balance at December 31, 2007
              
              
              357
              
              
              -
              
              
              99
              
              
              456First
                  quarter 2008 charge to expense
              
              
              365
              
              
              -
              
              
              668
              
              
              1,033Second
                  quarter 2008 charge to expense
              
              
              375
              
              
              -
              
              
              1,641
              
              
              2,016Cash
                  Payments
              
              
              (12
              )
              
              -
              
              
              (2,218
              )
              
              (2,230
              )Accrued
                  balance at June 30, 2008
              
              $
              1,085
              
              $
              -
              
              $
              190
              
              $
              1,275Remaining
                  expected restructuring charge
              
              $
              760
              
              $
              296
              
              $
              2,075
              
              $
              3,131




(A)
            Total
                expected restructuring charges does not include the expected gain
                from the
                future sale of the Company’s Sarasota, Florida,
                facility.




9


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**




All
      restructuring charges, except for asset-related charges, result in cash
      outflows. Severance costs relate to a reduction in workforce. Other associated
      costs include premium direct labor, inventory and equipment move costs,
      relocation expense, increased inventory carrying cost and miscellaneous
      expenditures associated with exiting business activities. No fixed-asset
      impairment charges were incurred because assets are being transferred to other
      locations for continued production.





**(9)
      Commitments and Contingencies**





In
      the
      ordinary course of business, the Company is involved in various legal
      proceedings and workers’ compensation and product liability disputes. The
      Company is of the opinion that the ultimate resolution of these matters will
      not
      have a material adverse effect on the results of operations, cash flows or
      the
      financial position of the Company.




***Product
      Warranty and Recall***





Amounts
      accrued for product warranty and recall claims are established based on the
      Company’s best estimate of the amounts necessary to settle future and existing
      claims on products sold as of the balance sheet dates. These accruals are based
      on several factors including past experience, production changes, industry
      developments and various other considerations. The Company can provide no
      assurances that it will not experience material claims in the future or that
      it
      will not incur significant costs to defend or settle such claims beyond the
      amounts accrued or beyond what the Company may recover from its
      suppliers.





The
      following provides a reconciliation of changes in product warranty and recall
      liability for the six months ended June 30, 2008 and 2007:




**2008**
              
              **2007**Product
                  warranty and recall at beginning of period
              
              $
              5,306
              
              $
              5,825Accruals
                  for products shipped during period
              
              
              3,417
              
              
              1,228Aggregate
                  changes in pre-existing liabilities due to claims
                  developments
              
              
              745
              
              
              847Settlements
                  made during the period (in cash or in kind)
              
              
              (2,157
              )
              
              (2,069
              )Product
                  warranty and recall at end of period
              
              $
              7,311
              
              $
              5,831





**(10)
      Employee Benefit Plans**





The
      Company has a single defined benefit pension plan that covers certain employees
      in the United Kingdom and a postretirement benefit plan that covers certain
      employees in the U.S. The components of net periodic benefit cost under the
      plans are as follows:


**Defined
                  Benefit Pension Plan****Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Service
                  cost
              
              $
              35
              
              $
              43
              
              $
              70
              
              $
              85Interest
                  cost
              
              
              316
              
              
              514
              
              
              632
              
              
              1,021Expected
                  return on plan assets
              
              
              (361
              )
              
              (574
              )
              
              (722
              )
              
              (1,140
              )Amortization
                  of actuarial loss
              
              
              -
              
              
              111
              
              
              -
              
              
              221Net
                  periodic (benefit) cost
              
              $
              (10
              )
              $
              94
              
              $
              (20
              )
              $
              187




The
      Company previously disclosed in its financial statements for the year ended
      December 31, 2007 that it expected to contribute $259 to its defined benefit
      pension plan in 2008. Of this amount, contributions of $130 have been made
      to
      the defined benefit pension plan as of June 30, 2008.




10


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**




**(11)
      Income Taxes**





The
      Company recognized a provision for income taxes of $4,062, or 46.4% of pre-tax
      income, and $666, or 19.8% of pre-tax income, for federal, state and foreign
      income taxes for the three months ended June 30, 2008 and 2007, respectively.
      The Company recognized a provision for income taxes of $9,174, or 45.0% of
      pre-tax income, and $1,853, or 19.7% of pre-tax income, for federal, state
      and
      foreign income taxes for the six months ended June 30, 2008 and 2007,
      respectively. The increase in the effective tax rate for both the three and
      six
      months ended June 30, 2008 compared to similar periods in 2007 were primarily
      attributable to the costs incurred to restructure the Company’s United Kingdom
      operations. As
      the
      Company does not believe that the related tax benefit of those losses will
      be
      realized, a valuation allowance was recorded against the deferred tax assets
      associated with those foreign losses. In addition, the effective tax rate was
      unfavorably impacted due to the expiration of the federal
      research and development tax credit at December 31, 2007.





As
      of
      December 31, 2007, the Company provided a liability of $4,618, excluding
      interest and penalties, for unrecognized tax benefits related to various
      federal, state and foreign income tax matters. The liability for uncertain
      tax
      positions is classified as a non-current income tax liability unless it is
      expected to be paid within one year. At June 30, 2008 the Company has classified
      $1,412 as a current liability and $3,412 as a reduction to non-current deferred
      income tax assets. The liability for unrecognized tax positions decreased by
      $143 for the second quarter ended June 30, 2008 and decreased by $148 for the
      six months ended June 30, 2008 resulting in a balance at June 30, 2008 of
      $4,470. Through a combination of anticipated state audit settlements and the
      expiration of certain statutes of limitation, the amount of unrecognized tax
      benefits could decrease by approximately $226 to $614 within the next 12
      months.





If
      the
      Company’s tax positions are sustained by the taxing authorities in favor of the
      Company, approximately $4,313 would reduce the Company’s provision for income
      taxes.





The
      Company classifies interest expense and, if applicable, penalties which could
      be
      assessed related to unrecognized tax benefits as a component of income tax
      expense. For the six months ended June 30, 2008 and 2007, the Company recognized
      approximately $10 and $(43) of gross interest and penalties, respectively.
      The
      Company has accrued approximately $682 and $672 for the payment of interest
      and
      penalties at June 30, 2008 and December 31, 2007, respectively.





The
      Company conducts business globally and, as a result, the Company or a subsidiary
      of the Company files income tax returns in the U.S. federal jurisdiction and
      various state and foreign jurisdictions. In the normal course of business the
      Company is subject to examination by taxing authorities throughout the world.
      The following table summarizes the open tax years for each important
      jurisdiction:





Jurisdiction
            Open
                Tax YearsU.S.
                Federal
            2004-2007France
            2003-2007Mexico
            2002-2007Spain
            2003-2007Sweden
            2002-2007United
                Kingdom
            2003-2007





During
      the third quarter of 2007 the U.S. Internal Revenue Service commenced an
      examination of the Company’s 2005 federal income tax return. It is anticipated
      that this examination should be completed during the second half of 2008. The
      Company is also under examination for income and non-income tax filings in
      various state and foreign jurisdictions that should be completed at various
      times throughout 2008.




11


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**




**(12)
      Accounting Pronouncements**





In
      December 2007, the Financial Accounting Standards Board (“FASB”) issued
      SFAS No. 141(R), *Business
      Combinations* (“SFAS
      141(R)”). This
      standard improves reporting by creating greater consistency in the accounting
      and financial reporting of business combinations. Additionally, SFAS 141(R)
      requires the acquiring entity in a business combination to recognize all (and
      only) the assets acquired and liabilities assumed in the transaction;
      establishes the acquisition-date fair value as the measurement objective for
      all
      assets acquired and liabilities assumed; and requires the acquirer to disclose
      to investors and other users all of the information they need to evaluate and
      understand the nature and financial effect of the business combination.
      SFAS 141(R) is effective for financial statements issued for fiscal years
      beginning after December 15, 2008. Early adoption of this standard is
      prohibited. In the absence of any planned future business combinations,
      management does not currently expect SFAS 141(R) to have a material impact
      on the Company’s financial position, results of operations or cash
      flows.





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements* (“SFAS
      160”). This standard improves the relevance, comparability and transparency of
      financial information provided to investors by requiring all entities to report
      noncontrolling (minority) interests in subsidiaries in the same way.
      Additionally, SFAS 160 eliminates the diversity that currently exists in
      accounting for transactions between an entity and noncontrolling interests
      by
      requiring they be treated as equity transactions. SFAS 160 is effective for
      financial statements issued for fiscal years beginning after December 15,
      2008. Early adoption of this standard is prohibited. In the absence of any
      noncontrolling (minority) interests, management does not currently expect
      SFAS 160 to have a material impact on the Company’s financial position,
      results of operations or cash flows.





In
      March
      2008, the FASB issued SFAS No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities—an amendment of FASB
      Statement No. 133* ,
      (“SFAS
      161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and
      hedging activities, including (i) how and why an entity uses derivative
      instruments, (ii) how derivative instruments and related hedged items are
      accounted for under SFAS 133, and (iii) how derivative instruments and
      related hedged items affect an entity’s financial position, financial
      performance, and cash flows. This standard becomes effective on January 1,
      2009. Earlier adoption of SFAS 161 and, separately, comparative disclosures
      for
      earlier periods at initial adoption are encouraged. As SFAS 161 only requires
      enhanced disclosures, this standard will have no impact on the Company’s
      financial position, results of operations or cash flows.




12


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**




**(13)
      Segment Reporting**





SFAS
      No.
      131, *Disclosures
      about Segments of an Enterprise and Related Information,* establishes standards for reporting information about operating segments in
      financial statements. Operating segments are defined as components of an
      enterprise that are evaluated regularly by the Company’s chief operating
      decision maker in deciding how to allocate resources and in assessing
      performance. The Company’s chief operating decision maker is the president and
      chief executive officer.





The
      Company has two reportable segments: Electronics and Control Devices. During
      the
      third quarter of 2007, a European business unit in the Control Devices
      reportable segment experienced a change in future business prospects due to
      the
      loss of a significant customer contract. As a result, the Company announced
      that
      it would cease manufacturing at this location and transfer remaining production
      to a business unit in the Electronics reportable segment. In addition,
      management and oversight responsibilities for this business were realigned
      to
      the Electronics reportable segment. Because the Company changed the structure
      of
      its internal organization in a manner that caused the composition of its
      reportable segments to change, the corresponding information for prior periods
      has been reclassified to conform to the current year reportable segment
      presentation.




The
      Company’s operating segments are aggregated based on
      sharing similar economic characteristics. Other aggregation factors include
      the
      nature of the products offered and management and oversight responsibilities. The
      Electronics reportable segment produces electronic instrument clusters,
      electronic control units, driver information systems and electrical distribution
      systems, primarily wiring harnesses and connectors for electrical power and
      signal distribution. The Control Devices reportable segment produces electronic
      and electromechanical switches, control actuation devices and
      sensors.





The
      accounting policies of the Company’s reportable segments are the same as those
      described in Note 2, “Summary of Significant Accounting Policies” of the
      Company’s December 31, 2007 Form 10-K. The Company’s management evaluates the
      performance of its reportable segments based primarily on revenues from external
      customers, capital expenditures and income before income taxes. Inter-segment
      sales are accounted for on terms similar to those to third parties and are
      eliminated upon consolidation.





A
      summary
      of financial information by reportable segment is as follows:




**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****Net
                  Sales**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**Electronics
              
              $
              149,416
              
              $
              107,911
              
              $
              282,632
              
              $
              218,476Inter-segment
                  sales
              
              
              4,004
              
              
              4,748
              
              
              7,747
              
              
              9,333Electronics
                  net sales
              
              
              153,420
              
              
              112,659
              
              
              290,379
              
              
              227,809Control
                  Devices
              
              
              63,813
              
              
              75,891
              
              
              133,667
              
              
              150,354Inter-segment
                  sales
              
              
              1,284
              
              
              1,117
              
              
              2,604
              
              
              2,483Control
                  Devices net sales
              
              
              65,097
              
              
              77,008
              
              
              136,271
              
              
              152,837Eliminations
              
              
              (5,288
              )
              
              (5,865
              )
              
              (10,351
              )
              
              (11,816
              )Total
                  consolidated net sales
              
              $
              213,229
              
              $
              183,802
              
              $
              416,299
              
              $
              368,830




**Income
                  Before Income Taxes**Electronics
              
              $
              12,984
              
              $
              988
              
              $
              25,975
              
              $
              6,141Control
                  Devices
              
              
              (985
              )
              
              6,405
              
              
              1,091
              
              
              10,887Other
                  corporate activities
              
              
              1,739
              
              
              1,573
              
              
              3,646
              
              
              3,521Corporate
                  interest expense, net
              
              
              (4,992
              )
              
              (5,605
              )
              
              (10,307
              )
              
              (11,131
              )Total
                  consolidated income before income taxes
              
              $
              8,746
              
              $
              3,361
              
              $
              20,405
              
              $
              9,418




**Depreciation
                  and Amortization**Electronics
              
              $
              3,406
              
              $
              3,596
              
              $
              6,922
              
              $
              6,764Control
                  Devices
              
              
              3,672
              
              
              3,716
              
              
              7,501
              
              
              7,683Corporate
                  activities
              
              
              1
              
              
              88
              
              
              (5
              )
              
              173Total
                  consolidated depreciation and amortization(A)
              
              $
              7,079
              
              $
              7,400
              
              $
              14,418
              
              $
              14,620




(A)
      These
      amounts represent depreciation and amortization on fixed and certain intangible
      assets.




13




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****Interest
                  Expense (Income)**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**Electronics
              
              $
              (110
              )
              $
              14
              
              $
              (53
              )
              $
              (27
              )Control
                  Devices
              
              
              (2
              )
              
              -
              
              
              (2
              )
              
              (1
              )Corporate
                  activities
              
              
              4,992
              
              
              5,605
              
              
              10,307
              
              
              11,131Total
                  consolidated interest expense, net
              
              $
              4,880
              
              $
              5,619
              
              $
              10,252
              
              $
              11,103




**Capital
                  Expenditures**Electronics
              
              $
              2,973
              
              $
              1,657
              
              $
              4,744
              
              $
              4,994Control
                  Devices
              
              
              3,238
              
              
              2,606
              
              
              6,932
              
              
              5,410Corporate
                  activities
              
              
              (83
              )
              
              (256
              )
              
              (35
              )
              
              410Total
                  consolidated capital expenditures
              
              $
              6,128
              
              $
              4,007
              
              $
              11,641
              
              $
              10,814




**June
                  30,**
              
              **December
                  31,****Total
                  Assets**
              
              **2008**
              
              **2007**Electronics
              
              $
              245,434
              
              $
              214,119Control
                  Devices
              
              
              183,898
              
              
              180,785Corporate(B)
              
              
              275,547
              
              
              282,695Eliminations
              
              
              (158,485
              )
              
              (149,830
              )Total
                  consolidated assets
              
              $
              546,394
              
              $
              527,769




(B)
      Assets located at Corporate consist primarily of cash, deferred taxes and equity
      investments.





The
      following table presents net sales and non-current assets for each of the
      geographic areas in which the Company operates:


**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****Net
                  Sales**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**North
                  America
              
              $
              156,101
              
              $
              132,449
              
              $
              303,299
              
              $
              266,510Europe
                  and other
              
              
              57,128
              
              
              51,353
              
              
              113,000
              
              
              102,320Total
                  consolidated net sales
              
              $
              213,229
              
              $
              183,802
              
              $
              416,299
              
              $
              368,830




**June
                  30,**
              
              **December
                  31,****Non-Current
                  Assets**
              
              **2008**
              
              **2007**North
                  America
              
              $
              202,993
              
              $
              204,556Europe
                  and other
              
              
              22,084
              
              
              21,854Total
                  consolidated non-current assets
              
              $
              225,077
              
              $
              226,410




**(14)
      Investments**





***PST
      Eletrônica S.A .***





The
      Company has a 50% equity interest in PST Eletrônica S.A. (“PST”), a Brazilian
      electronic system provider focused on security and convenience applications
      primarily for the vehicle and motorcycle industry. The investment is accounted
      for under the equity method of accounting. The Company’s investment in PST was
      $38,620 and $29,663 at June 30, 2008 and December 31, 2007, respectively.




14


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


Condensed
      financial information for PST is as follows:




**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,****2008**
              
              **2007**
              
              **2008**
              
              **2007**Revenues
              
              $
              46,446
              
              $
              31,279
              
              $
              90,392
              
              $
              58,630Cost
                  of sales
              
              $
              21,921
              
              $
              14,683
              
              $
              42,969
              
              $
              27,506Total
                  pre-tax income
              
              $
              7,036
              
              $
              5,040
              
              $
              15,799
              
              $
              10,365The
                  Company's share of pre-tax income
              
              $
              3,518
              
              $
              2,520
              
              $
              7,900
              
              $
              5,183




Equity
      in
      earnings of PST included in the condensed consolidated statements of operations
      were $2,848 and $2,141 for the three months ended June 30, 2008 and 2007,
      respectively. For
      the
      six months ended June 30, 2008 and 2007, equity in earnings of PST were $6,442
      and $4,156, respectively.





***Minda
      Stoneridge Instruments Ltd.***





The
      Company has a 49% interest in Minda Stoneridge Instruments Ltd. (“Minda”), a
      company based in India that manufactures electronics and instrumentation
      equipment for the motorcycle and commercial vehicle market. The
      investment is accounted for under the equity method of accounting. The
      Company’s investment in Minda was $4,879 and $4,547 at June 30, 2008 and
      December 31, 2007, respectively. Equity in earnings of Minda included in the
      condensed consolidated statements of operations were $168 and $157, for the
      three months ended June 30, 2008 and 2007, respectively. For the six months
      ended June 30, 2008 and 2007, equity in earnings of Minda were $393 and $262,
      respectively.




**(15)
      Guarantor Financial Information**





The
      senior notes and the credit facility are fully and unconditionally guaranteed,
      jointly and severally, by each of the Company’s existing and future domestic
      wholly owned subsidiaries (Guarantor Subsidiaries). The Company’s non-U.S.
      subsidiaries do not guarantee the senior notes or the credit facility
      (Non-Guarantor Subsidiaries).





Presented
      below are summarized consolidating financial statements of the Parent (which
      includes certain of the Company’s operating units), the Guarantor Subsidiaries,
      the Non-Guarantor Subsidiaries and the Company on a condensed consolidated
      basis, as of June 30, 2008 and December 31, 2007 and for each of the three
      and
      six months ended June 30, 2008 and 2007.





These
      summarized condensed consolidating financial statements are prepared under
      the
      equity method. Separate financial statements for the Guarantor Subsidiaries
      are
      not presented based on management’s determination that they do not provide
      additional information that is material to investors. Therefore, the Guarantor
      Subsidiaries are combined in the presentations on the subsequent
      pages.




15




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


**June
                  30, 2008****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**ASSETSCurrent
                  Assets:Cash
                  and cash equivalents
              
              $
              33,942
              
              $
              45
              
              $
              47,355
              
              $
              -
              
              $
              81,342Accounts
                  receivable, net
              
              
              75,247
              
              
              25,784
              
              
              41,441
              
              
              -
              
              
              142,472Inventories,
                  net
              
              
              31,994
              
              
              11,180
              
              
              27,001
              
              
              -
              
              
              70,175Prepaid
                  expenses and other
              
              
              (299,418
              )
              
              303,945
              
              
              12,838
              
              
              -
              
              
              17,365Deferred
                  income taxes
              
              
              3,339
              
              
              4,339
              
              
              2,285
              
              
              -
              
              
              9,963Total
                  current assets
              
              
              (154,896
              )
              
              345,293
              
              
              130,920
              
              
              -
              
              
              321,317Long-Term
                  Assets:Property,
                  plant and equipment, net
              
              
              48,687
              
              
              24,674
              
              
              17,250
              
              
              -
              
              
              90,611Other
                  Assets:Goodwill
              
              
              44,584
              
              
              20,591
              
              
              555
              
              
              -
              
              
              65,730Investments
                  and other, net
              
              
              47,192
              
              
              303
              
              
              467
              
              
              -
              
              
              47,962Deferred
                  income taxes
              
              
              24,809
              
              
              (2,753
              )
              
              (1,282
              )
              
              -
              
              
              20,774Investment
                  in subsidiaries
              
              
              448,119
              
              
              -
              
              
              -
              
              
              (448,119
              )
              
              -Total
                  long-term assets
              
              
              613,391
              
              
              42,815
              
              
              16,990
              
              
              (448,119
              )
              
              225,077Total
                  Assets
              
              $
              458,495
              
              $
              388,108
              
              $
              147,910
              
              $
              (448,119
              )
              $
              546,394LIABILITIES
                  AND SHAREHOLDERS’ EQUITYCurrent
                  Liabilities:Accounts
                  payable
              
              $
              30,369
              
              $
              19,704
              
              $
              26,736
              
              $
              -
              
              $
              76,809Accrued
                  expenses and other
              
              
              19,151
              
              
              10,644
              
              
              26,309
              
              
              -
              
              
              56,104Total
                  current liabilities
              
              
              49,520
              
              
              30,348
              
              
              53,045
              
              
              -
              
              
              132,913Long-Term
                  Liabilities:Long-term
                  debt
              
              
              183,000
              
              
              -
              
              
              -
              
              
              -
              
              
              183,000Deferred
                  income taxes
              
              
              -
              
              
              -
              
              
              2,909
              
              
              -
              
              
              2,909Other
                  liabilities
              
              
              571
              
              
              393
              
              
              1,204
              
              
              -
              
              
              2,168Total
                  long-term liabilities
              
              
              183,571
              
              
              393
              
              
              4,113
              
              
              -
              
              
              188,077Shareholders'
                  Equity
              
              
              225,404
              
              
              357,367
              
              
              90,752
              
              
              (448,119
              )
              
              225,404Total
                  Liabilities and Shareholders’ Equity
              
              $
              458,495
              
              $
              388,108
              
              $
              147,910
              
              $
              (448,119
              )
              $
              546,394


16




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


Supplemental
      condensed consolidating financial statements (continued):


**December
                  31, 2007****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**ASSETSCurrent
                  Assets:Cash
                  and cash equivalents
              
              $
              48,705
              
              $
              255
              
              $
              46,964
              
              $
              -
              
              $
              95,924Accounts
                  receivable, net
              
              
              53,456
              
              
              26,798
              
              
              42,034
              
              
              -
              
              
              122,288Inventories,
                  net
              
              
              25,472
              
              
              12,637
              
              
              19,283
              
              
              -
              
              
              57,392Prepaid
                  expenses and other
              
              
              (293,632
              )
              
              294,298
              
              
              15,260
              
              
              -
              
              
              15,926Deferred
                  income taxes
              
              
              3,152
              
              
              4,591
              
              
              2,086
              
              
              -
              
              
              9,829Total
                  current assets
              
              
              (162,847
              )
              
              338,579
              
              
              125,627
              
              
              -
              
              
              301,359Long-Term
                  Assets:Property,
                  plant and equipment, net
              
              
              48,294
              
              
              25,632
              
              
              18,826
              
              
              -
              
              
              92,752Other
                  Assets:Goodwill
              
              
              44,585
              
              
              20,591
              
              
              -
              
              
              -
              
              
              65,176Investments
                  and other, net
              
              
              38,783
              
              
              331
              
              
              340
              
              
              -
              
              
              39,454Deferred
                  income taxes
              
              
              33,169
              
              
              (2,843
              )
              
              (1,298
              )
              
              -
              
              
              29,028Investment
                  in subsidiaries
              
              
              438,271
              
              
              -
              
              
              -
              
              
              (438,271
              )
              
              -Total
                  long-term assets
              
              
              603,102
              
              
              43,711
              
              
              17,868
              
              
              (438,271
              )
              
              226,410Total
                  Assets
              
              $
              440,255
              
              $
              382,290
              
              $
              143,495
              
              $
              (438,271
              )
              $
              527,769LIABILITIES
                  AND SHAREHOLDERS’ EQUITYCurrent
                  Liabilities:Accounts
                  payable
              
              $
              20,924
              
              $
              19,533
              
              $
              28,916
              
              $
              -
              
              $
              69,373Accrued
                  expenses and other
              
              
              12,546
              
              
              9,198
              
              
              25,454
              
              
              -
              
              
              47,198Total
                  current liabilities
              
              
              33,470
              
              
              28,731
              
              
              54,370
              
              
              -
              
              
              116,571Long-Term
                  Liabilities:Long-term
                  debt
              
              
              200,000
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000Deferred
                  income taxes
              
              
              -
              
              
              -
              
              
              2,665
              
              
              -
              
              
              2,665Other
                  liabilities
              
              
              596
              
              
              393
              
              
              1,355
              
              
              -
              
              
              2,344Total
                  long-term liabilities
              
              
              200,596
              
              
              393
              
              
              4,020
              
              
              -
              
              
              205,009Shareholders'
                  Equity
              
              
              206,189
              
              
              353,166
              
              
              85,105
              
              
              (438,271
              )
              
              206,189Total
                  Liabilities and Shareholders’ Equity
              
              $
              440,255
              
              $
              382,290
              
              $
              143,495
              
              $
              (438,271
              )
              $
              527,769







17




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


Supplemental
      condensed consolidating financial statements (continued):


**For
                  the Three Months Ended June 30, 2008****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**Net
                  Sales
              
              $
              113,800
              
              $
              53,800
              
              $
              73,534
              
              $
              (27,905
              )
              $
              213,229Costs
                  and Expenses:Cost
                  of goods sold
              
              
              92,680
              
              
              43,041
              
              
              55,318
              
              
              (27,164
              )
              
              163,875Selling,
                  general and administrative
              
              
              13,809
              
              
              7,910
              
              
              15,753
              
              
              (741
              )
              
              36,731Loss
                  on sale of property, plantand
                  equipment, net
              
              
              88
              
              
              23
              
              
              42
              
              
              -
              
              
              153Restructuring
                  charges
              
              
              884
              
              
              -
              
              
              829
              
              
              -
              
              
              1,713Operating
                  Income
              
              
              6,339
              
              
              2,826
              
              
              1,592
              
              
              -
              
              
              10,757Interest
                  expense (income), net
              
              
              5,183
              
              
              -
              
              
              (303
              )
              
              -
              
              
              4,880Other
                  income, net
              
              
              (2,744
              )
              
              -
              
              
              (125
              )
              
              -
              
              
              (2,869
              )Equity
                  earnings from subsidiaries
              
              
              (4,341
              )
              
              -
              
              
              -
              
              
              4,341
              
              
              -Income
                  Before Income Taxes
              
              
              8,241
              
              
              2,826
              
              
              2,020
              
              
              (4,341
              )
              
              8,746Provision
                  for income taxes
              
              
              3,557
              
              
              19
              
              
              486
              
              
              -
              
              
              4,062Net
                  Income
              
              $
              4,684
              
              $
              2,807
              
              $
              1,534
              
              $
              (4,341
              )
              $
              4,684




**For
                  the Three Months Ended June 30, 2007****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**Net
                  Sales
              
              $
              85,017
              
              $
              54,528
              
              $
              65,096
              
              $
              (20,839
              )
              $
              183,802Costs
                  and Expenses:Cost
                  of goods sold
              
              
              69,086
              
              
              46,281
              
              
              49,642
              
              
              (20,089
              )
              
              144,920Selling,
                  general and administrative
              
              
              14,025
              
              
              7,640
              
              
              12,683
              
              
              (750
              )
              
              33,598Gain
                  on sale of property, plantand
                  equipment, net
              
              
              (304
              )
              
              (1,349
              )
              
              -
              
              
              -
              
              
              (1,653
              )Restructuring
                  charges
              
              
              31
              
              
              -
              
              
              -
              
              
              -
              
              
              31Operating
                  Income
              
              
              2,179
              
              
              1,956
              
              
              2,771
              
              
              -
              
              
              6,906Interest
                  expense (income), net
              
              
              5,870
              
              
              -
              
              
              (251
              )
              
              -
              
              
              5,619Other
                  income, net
              
              
              (1,865
              )
              
              (26
              )
              
              (183
              )
              
              -
              
              
              (2,074
              )Equity
                  earnings from subsidiaries
              
              
              (5,043
              )
              
              -
              
              
              -
              
              
              5,043
              
              
              -Income
                  Before Income Taxes
              
              
              3,217
              
              
              1,982
              
              
              3,205
              
              
              (5,043
              )
              
              3,361Provision
                  for income taxes
              
              
              522
              
              
              3
              
              
              141
              
              
              -
              
              
              666Net
                  Income
              
              $
              2,695
              
              $
              1,979
              
              $
              3,064
              
              $
              (5,043
              )
              $
              2,695






18


**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**


Supplemental
      condensed consolidating financial statements (continued):


**For
                  the Six Months Ended June 30, 2008****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**Net
                  Sales
              
              $
              217,846
              
              $
              106,367
              
              $
              143,865
              
              $
              (51,779
              )
              $
              416,299Costs
                  and Expenses:Cost
                  of goods sold
              
              
              175,237
              
              
              83,300
              
              
              106,985
              
              
              (50,394
              )
              
              315,128Selling,
                  general and administrative
              
              
              28,083
              
              
              16,354
              
              
              29,969
              
              
              (1,385
              )
              
              73,021Loss
                  on sale of property, plantand
                  equipment, net
              
              
              79
              
              
              24
              
              
              42
              
              
              -
              
              
              145Restructuring
                  charges
              
              
              1,425
              
              
              -
              
              
              1,710
              
              
              -
              
              
              3,135Operating
                  Income
              
              
              13,022
              
              
              6,689
              
              
              5,159
              
              
              -
              
              
              24,870Interest
                  expense (income), net
              
              
              10,706
              
              
              -
              
              
              (454
              )
              
              -
              
              
              10,252Other
                  (income) expense, net
              
              
              (6,065
              )
              
              -
              
              
              278
              
              
              -
              
              
              (5,787
              )Equity
                  earnings from subsidiaries
              
              
              (10,466
              )
              
              -
              
              
              -
              
              
              10,466
              
              
              -Income
                  Before Income Taxes
              
              
              18,847
              
              
              6,689
              
              
              5,335
              
              
              (10,466
              )
              
              20,405Provision
                  for income taxes
              
              
              7,616
              
              
              82
              
              
              1,476
              
              
              -
              
              
              9,174Net
                  Income
              
              $
              11,231
              
              $
              6,607
              
              $
              3,859
              
              $
              (10,466
              )
              $
              11,231




**For
                  the Six Months Ended June 30, 2007****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**Net
                  Sales
              
              $
              173,868
              
              $
              106,599
              
              $
              129,071
              
              $
              (40,708
              )
              $
              368,830Costs
                  and Expenses:Cost
                  of goods sold
              
              
              147,630
              
              
              82,862
              
              
              95,909
              
              
              (39,300
              )
              
              287,101Selling,
                  general and administrative
              
              
              27,050
              
              
              15,673
              
              
              25,415
              
              
              (1,408
              )
              
              66,730(Gain)
                  Loss on sale of property, plantand
                  equipment, net
              
              
              (347
              )
              
              (1,349
              )
              
              8
              
              
              -
              
              
              (1,688
              )Restructuring
                  charges
              
              
              72
              
              
              -
              
              
              -
              
              
              -
              
              
              72Operating
                  Income (Loss)
              
              
              (537
              )
              
              9,413
              
              
              7,739
              
              
              -
              
              
              16,615Interest
                  expense (income), net
              
              
              11,668
              
              
              -
              
              
              (565
              )
              
              -
              
              
              11,103Other
                  income, net
              
              
              (3,898
              )
              
              -
              
              
              (8
              )
              
              -
              
              
              (3,906
              )Equity
                  earnings from subsidiaries
              
              
              (16,534
              )
              
              -
              
              
              -
              
              
              16,534
              
              
              -Income
                  Before Income Taxes
              
              
              8,227
              
              
              9,413
              
              
              8,312
              
              
              (16,534
              )
              
              9,418Provision
                  for income taxes
              
              
              662
              
              
              7
              
              
              1,184
              
              
              -
              
              
              1,853Net
                  Income
              
              $
              7,565
              
              $
              9,406
              
              $
              7,128
              
              $
              (16,534
              )
              $
              7,565




19




**STONERIDGE,
        INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**
 **(in
        thousands, except share and per share data, unless otherwise
        indicated)**





Supplemental
      condensed consolidating financial statements (continued):


**For
                  the Six Months Ended June 30, 2008****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-****Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**Net
                  cash provided by operating activities
              
              $
              8,318
              
              $
              2,224
              
              $
              2,032
              
              $
              -
              
              $
              12,574INVESTING
                  ACTIVITIES:Capital
                  expenditures
              
              
              (6,831
              )
              
              (2,435
              )
              
              (2,375
              )
              
              -
              
              
              (11,641
              )Proceeds
                  from the sale of fixed assets
              
              
              141
              
              
              1
              
              
              165
              
              
              -
              
              
              307Business
                  acquisitions and other
              
              
              -
              
              
              -
              
              
              (980
              )
              
              -
              
              
              (980
              )Net
                  cash used for investing activities
              
              
              (6,690
              )
              
              (2,434
              )
              
              (3,190
              )
              
              -
              
              
              (12,314
              )FINANCING
                  ACTIVITIES:Repayments
                  of long-term debt
              
              
              (17,000
              )
              
              -
              
              
              -
              
              
              -
              
              
              (17,000
              )Share-based
                  compensation activity, net
              
              
              1,162
              
              
              -
              
              
              -
              
              
              -
              
              
              1,162Premiums
                  related to early extinguishment of debt
              
              
              (553
              )
              
              -
              
              
              -
              
              
              -
              
              
              (553
              )Net
                  cash used for financing activities
              
              
              (16,391
              )
              
              -
              
              
              -
              
              
              -
              
              
              (16,391
              )Effect
                  of exchange rate changes on cashand
                  cash equivalents
              
              
              -
              
              
              -
              
              
              1,549
              
              
              -
              
              
              1,549Net
                  change in cash and cash equivalents
              
              
              (14,763
              )
              
              (210
              )
              
              391
              
              
              -
              
              
              (14,582
              )Cash
                  and cash equivalents at beginningof
                  period
              
              
              48,705
              
              
              255
              
              
              46,964
              
              
              -
              
              
              95,924Cash
                  and cash equivalents at end of period
              
              $
              33,942
              
              $
              45
              
              $
              47,355
              
              $
              -
              
              $
              81,342




**For
                  the Six Months Ended June 30, 2007****Parent**
              
              **Guarantor
                  Subsidiaries**
              
              **Non-Guarantor
                  Subsidiaries**
              
              **Eliminations**
              
              **Consolidated**Net
                  cash provided by (used for) operating activities
              
              $
              3,730
              
              $
              (1,949
              )
              $
              3,038
              
              $
              (800
              )
              $
              4,019INVESTING
                  ACTIVITIES:Capital
                  expenditures
              
              
              (6,090
              )
              
              (2,380
              )
              
              (2,344
              )
              
              -
              
              
              (10,814
              )Proceeds
                  from sale of fixed assets
              
              
              308
              
              
              4,643
              
              
              -
              
              
              -
              
              
              4,951Business
                  acquisitions and other
              
              
              (207
              )
              
              (286
              )
              
              (7
              )
              
              500
              
              
              -Net
                  cash (used for) provided by investing activities
              
              
              (5,989
              )
              
              1,977
              
              
              (2,351
              )
              
              500
              
              
              (5,863
              )FINANCING
                  ACTIVITIES:Borrowings
                  (repayments) of long-term debt
              
              
              -
              
              
              -
              
              
              (300
              )
              
              300
              
              
              -Share-based
                  compensation activity, net
              
              
              1,796
              
              
              -
              
              
              -
              
              
              -
              
              
              1,796Net
                  cash provided by (used for) financing activities
              
              
              1,796
              
              
              -
              
              
              (300
              )
              
              300
              
              
              1,796Effect
                  of exchange rate changes on cashand
                  cash equivalents
              
              
              -
              
              
              -
              
              
              232
              
              
              -
              
              
              232Net
                  change in cash and cash equivalents
              
              
              (463
              )
              
              28
              
              
              619
              
              
              -
              
              
              184Cash
                  and cash equivalents at beginningof
                  period
              
              
              28,937
              
              
              12
              
              
              36,933
              
              
              -
              
              
              65,882Cash
                  and cash equivalents at end of period
              
              $
              28,474
              
              $
              40
              
              $
              37,552
              
              $
              -
              
              $
              66,066




20




**Item
      2. Management** **’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.**





***Overview***





The
      following Management Discussion and Analysis (“MD&A”) is intended to help
      the reader understand the results of operations and financial condition of
      the
      Company. This MD&A is provided as a supplement to, and should be read in
      conjunction with, our financial statements and the accompanying notes to the
      financial statements.





We
      are an
      independent designer and manufacturer of highly engineered electrical and
      electronic components, modules and systems for the automotive, medium- and
      heavy-duty truck, agricultural and off-highway vehicle markets.





Our
      revenue for the second quarter of 2008 was favorably affected by both strong
      electronics sales in North America and Europe and the impact of foreign currency
      translation. This increase was partially offset by lower sales volumes in our
      North American automotive market.





We
      recognized net income for the second quarter ended June 30, 2008 of $4.7
      million, or $0.20 per diluted share, compared with net income of $2.7 million,
      or $0.11 per diluted share, for the second quarter of 2007.





We
      recognized net income for the six-month period ended June 30, 2008 of $11.2
      million, or $0.47 per diluted share, compared with net income of $7.6 million,
      or $0.32 per diluted share, for the comparable period of 2007.





Our
      second quarter 2008 profitability was favorably affected by new business sales
      in North America and a favorable sales mix relative to the second quarter of
      2007. In addition, our PST Eletrônica S.A. (“PST”) joint venture in Brazil
      continued to perform well, resulting in equity earnings of $2.8 million for
      the
      second quarter of 2008 compared to $2.1 million in the second quarter of
      2007.





The
      increase in profitability was partially offset by increased selling, general
      and
      administrative expenses (“SG&A”) due to increased design and development
      expenses related to new product launches and business development in our
      European commercial vehicle business. In addition, results from the second
      quarter of 2007 included a $1.6 million pre-tax gain on the sales of two closed
      facilities.





Also
      affecting our profitability were restructuring initiatives that began in the
      fourth quarter of 2007 to improve the Company’s manufacturing efficiency and
      cost position by ceasing manufacturing operations at our Sarasota, Florida,
      and
      Mitcheldean, United Kingdom, locations. Related second quarter 2008 expenses
      were approximately $3.7 million, primarily comprised of one-time termination
      benefits and line-transfer expenses. We
      anticipate incurring total pre-tax charges of approximately $9.0 million to
      $13.0 million in 2008 for the restructuring, net of an expected gain from the
      future sale of our Sarasota, Florida, facility, which may or may not occur
      in
      2008. We currently estimate a pre-tax gain on the expected facility sale to
      be
      in the range of $3.0 million to $4.0 million.





We
      believe the recent decline in North American light vehicle production will
      have
      an impact on our sales volumes for the remainder of 2008 and may continue into
      2009. Also, significant factors inherent to our markets that could affect our
      results include the financial stability of our customers and suppliers as well
      as our ability to successfully execute our planned retructuring initiatives.
      Our
      results also depend on conditions in the automotive and commercial vehicle
      industries, which are generally dependent on domestic and global
      economies.





***Results
      of Operations***





We
      are
      primarily organized by markets served and products produced. Under this
      organizational structure, our operations have been aggregated into two
      reportable segments: Electronics and Control Devices. The Electronics reportable
      segment includes results
      of operations that design and manufacture electronic instrument clusters,
      electronic control units, driver information systems and electrical distribution
      systems, primarily wiring harnesses and connectors for electrical power and
      signal distribution. The Control Devices reportable segment includes results
      of
      operations from our operations that design and manufacture electronic and
      electromechanical switches, control actuation devices and sensors.




21





During
      the third quarter of 2007, a European business unit in the Control Devices
      reportable segment experienced a change in future business prospects due to
      the
      loss of a significant customer contract. As a result, the Company announced
      that
      it would cease manufacturing at this location and transfer remaining production
      to a business unit in the Electronics reportable segment. In addition,
      management and oversight responsibilities for this business were realigned
      to
      the Electronics reportable segment. Because the Company changed the structure
      of
      its internal organization in a manner that caused the composition of its
      reportable segments to change, the corresponding information for prior periods
      has been reclassified to conform to the current year reportable segment
      presentation.





***Three
      Months Ended June 30, 2008 Compared to Three Months Ended June 30,
      2007***





*Net
      Sales.* Net
      sales for our reportable segments, excluding inter-segment sales, for the three
      months ended June 30, 2008 and 2007 are summarized in the following table (in
      thousands):




**Three
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**
              
              **(Decrease)**Electronics
              
              $
              149,416
              
              
              70.1
              %
              
              $
              107,911
              
              
              58.7
              %
              
              $
              41,505
              
              
              38.5
              %Control
                  Devices
              
              
              63,813
              
              
              29.9
              
              
              
              75,891
              
              
              41.3
              
              
              
              (12,078
              )
              
              (15.9
              )%Total
                  net sales
              
              $
              213,229
              
              
              100.0
              %
              
              $
              183,802
              
              
              100.0
              %
              
              $
              29,427
              
              
              16.0
              %





The
      increase in net sales for our Electronics segment was primarily due to new
      business sales in North America, increased sales volume in our European
      commercial vehicle operations and favorable foreign currency exchange rates.
      Favorable foreign currency exchange rates contributed $4.3 million to sales
      in
      the second quarter compared with the prior year. The increase was partially
      offset by contractual price reductions.





The
      decrease in net sales for our Control Devices segment was primarily attributable
      to production volume reductions at our major customers in the automotive vehicle
      market and the loss of sensor product revenue at our Sarasota, Florida,
      facility.





Net
      sales
      by geographic location for the three
      months ended June 30,
      2008 and 2007 are summarized in the following table (in
      thousands):


**Three
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**
              
              **(Decrease)**North
                  America
              
              $
              156,101
              
              
              73.2
              %
              
              $
              132,449
              
              
              72.1
              %
              
              $
              23,652
              
              
              17.9
              %Europe
                  and other
              
              
              57,128
              
              
              26.8
              
              
              
              51,353
              
              
              27.9
              
              
              
              5,775
              
              
              11.2
              %Total
                  net sales
              
              $
              213,229
              
              
              100.0
              %
              
              $
              183,802
              
              
              100.0
              %
              
              $
              29,427
              
              
              16.0
              %





The
      increase in North American sales was primarily attributable to new business
      sales of electronics products. The increase was partially offset by lower sales
      volume in our North American automotive market. Our increase in sales outside
      North America for the second quarter was primarily due to increased European
      commercial vehicle sales volume and favorable foreign currency exchange rates.
      The favorable effect of foreign currency exchange rates affected net sales
      outside North America by $4.4 million in the second quarter of 2008 compared
      with the prior year.




22




Condensed
      consolidated statements of operations as a percentage of net sales for
      the three
      months ended June
      30,
      2008 and 2007 are
      presented in the following table (in thousands):


**Three
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**Net
                  Sales
              
              $
              213,229
              
              
              100.0
              %
              
              $
              183,802
              
              
              100.0
              %
              
              $
              29,427Costs
                  and Expenses:Cost
                  of goods sold
              
              
              163,875
              
              
              76.9
              
              
              
              144,920
              
              
              78.8
              
              
              
              18,955Selling,
                  general and administrative
              
              
              36,731
              
              
              17.2
              
              
              
              33,598
              
              
              18.3
              
              
              
              3,133(Gain)
                  Loss on sale of property, plantand
                  equipment, net
              
              
              153
              
              
              0.1
              
              
              
              (1,653
              )
              
              (0.9
              )
              
              
              1,806Restructuring
                  charges
              
              
              1,713
              
              
              0.8
              
              
              
              31
              
              
              0.0
              
              
              
              1,682Operating
                  Income
              
              
              10,757
              
              
              5.0
              
              
              
              6,906
              
              
              3.8
              
              
              
              3,851Interest
                  expense, net
              
              
              4,880
              
              
              2.3
              
              
              
              5,619
              
              
              3.1
              
              
              
              (739
              )Equity
                  in earnings of investees
              
              
              (3,016
              )
              
              (1.4
              )
              
              
              (2,298
              )
              
              (1.3
              )
              
              
              (718
              )Loss
                  on early extinguishment of debt
              
              
              271
              
              
              0.1
              
              
              
              -
              
              
              -
              
              
              
              271Other
                  expense (income), net
              
              
              (124
              )
              
              (0.1
              )
              
              
              224
              
              
              0.1
              
              
              
              (348
              )Income
                  Before Income Taxes
              
              
              8,746
              
              
              4.1
              
              
              
              3,361
              
              
              1.9
              
              
              
              5,385Provision
                  for income taxes
              
              
              4,062
              
              
              1.9
              
              
              
              666
              
              
              0.4
              
              
              
              3,396Net
                  Income
              
              $
              4,684
              
              
              2.2
              %
              
              $
              2,695
              
              
              1.5
              %
              
              $
              1,989




*Cost
      of Goods Sold.* The
      decrease in cost of goods sold as a percentage of sales was due to a more
      favorable product mix and new business sales. The decrease was partially offset
      by $1.9 million of restructuring expenses included in cost of goods sold in
      the
      second quarter of 2008.





*Selling,
      General and Administrative Expenses.* Product
      development expenses included in SG&A were $13.3 million and $10.9 million
      for the second quarters ended June 30, 2008 and 2007, respectively. The increase
      was primarily due to development spending in the areas of instrumentation and
      wiring.





*(Gain)
      Loss on Sale of Property, Plant and Equipment, net.* The gain
      in the second quarter of 2007 was primarily attributable to the sale
      of
      two closed facilities.





*Restructuring
      Charges.* The
      increase in restructuring charges that were general and administrative in
      nature, was primarily the result of the ratable recognition of one-time
      termination benefits that will be due to employees upon the closure of our
      Sarasota, Florida, and Mitcheldean, United Kingdom, locations. No fixed-asset
      impairment charges were incurred because assets are expected to be transferred
      to our other locations for continued production. Restructuring expenses that
      were general and administrative in nature were included in the Company’s
      condensed consolidated statements of operations as restructuring charges, while
      the remaining restructuring related expenses were included in cost of goods
      sold. We expect these initiatives to be substantially completed in
      2008.




23




Restructuring
      charges, general and administrative in nature, recorded by reportable segment
      during the three months ended June 30, 2008 were as follows (in
      thousands):


**Three
                  Months Ended****June
                  30, 2008****Electronics**
              
              **Control
                  Devices**
              
              **Total
                  Consolidated Restructuring Charges**Severance
                  costs
              
              $
              819
              
              $
              375
              
              $
              1,194Other
                  exit costs
              
              
              10
              
              
              509
              
              
              519Total
                  general and administrative restructuring charges
              
              $
              829
              
              $
              884
              
              $
              1,713





Severance
      costs relate to a reduction in workforce. Other exit costs include miscellaneous
      expenditures associated with exiting business activities.





Restructuring
      charges, general and administrative in nature, recorded by reportable segment
      during the three months ended June 30, 2007 were as follows (in
      thousands):




**Three
                  Months Ended****June
                  30, 2007****Electronics**
              
              **Control
                  Devices**
              
              **Total
                  Consolidated Restructuring Charges**Severance
                  costs
              
              $
              31
              
              $
              -
              
              $
              31Total
                  general and administrative restructuring charges
              
              $
              31
              
              $
              -
              
              $
              31





Restructuring
      related expenses, general and administrative in nature, for the second quarter
      of 2007 were due to severance costs related to the rationalization of certain
      manufacturing facilities in North America that were previously announced in
      2005. These restructuring initiatives were completed in 2007.




*Equity
      in Earnings of Investees.* The
      increase in equity earnings of investees was predominately attributable to
      the
      increase in equity earnings recognized from our PST joint venture. The increase
      primarily reflects higher volume for PST’s security product lines and favorable
      exchange rates.





*Income
      Before Income Taxes.* Income
      before income taxes is summarized in the following table by reportable segment
      (in thousands).


**Three
                  Months Ended****June
                  30,**
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              **2007**
              
              **(Decrease)**
              
              **(Decrease)**Electronics
              
              $
              12,984
              
              $
              988
              
              $
              11,996
              
              
              1,214.2
              %Control
                  Devices
              
              
              (985
              )
              
              6,405
              
              
              (7,390
              )
              
              (115.4
              )%Other
                  corporate activities
              
              
              1,739
              
              
              1,573
              
              
              166
              
              
              10.6
              %Corporate
                  interest expense, net
              
              
              (4,992
              )
              
              (5,605
              )
              
              613
              
              
              10.9
              %Income
                  before income taxes
              
              $
              8,746
              
              $
              3,361
              
              $
              5,385
              
              
              160.2
              %





The
      increase in income before income taxes in the Electronics segment was related
      to
      increased revenue and favorable product mix. These factors were partially offset
      by higher restructuring related expenses and higher SG&A expenses due to
      increased development spending in the areas of instrumentation and
      wiring.




24




The
      decrease in income before income taxes in the Control Devices reportable segment
      was primarily due to lower revenue and increased restructuring related expenses.





The
      increase in income before income taxes was also attributable to lower corporate
      interest expense. The decrease in corporate interest expense was primarily
      due
      to the purchase and retirement of $17.0 million in face value of the Company’s
      senior notes during the first six months of 2008.





Income
      before income taxes by geographic location for the three
      months ended June 30,
      2008 and 2007 is summarized in the following table (in thousands):


**Three
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**
              
              **(Decrease)**North
                  America
              
              $
              8,215
              
              
              93.9
              %
              
              $
              1,431
              
              
              42.6
              %
              
              $
              6,784
              
              
              474.1
              %Europe
                  and other
              
              
              531
              
              
              6.1
              
              
              
              1,930
              
              
              57.4
              
              
              
              (1,399
              )
              
              (72.5
              )%Income
                  before income taxes
              
              $
              8,746
              
              
              100.0
              %
              
              $
              3,361
              
              
              100.0
              %
              
              $
              5,385
              
              
              160.2
              %






The
      increase in our profitability in North America was primarily attributable to
      new
      business sales and additional sales volume to existing customers, mostly from
      electronics products. The increase was primarily offset by increased
      restructuring related expenses and lower North American automotive production.
      The decrease in profitability outside North America was primarily due to
      increased restructuring related expenses.





*Provision
      for Income Taxes.*  We
      recognized a provision for income taxes of $4.1 million, or 46.4% of pre-tax
      income, and $0.7 million, or 19.8% of the pre-tax income, for federal, state
      and
      foreign income taxes for the second quarters ended June 30, 2008 and 2007,
      respectively. The
      increase in the effective tax rate for the second quarter ended June 30, 2008
      compared to the second quarter ended June 30, 2007, was primarily attributable
      to the costs incurred to restructure our United Kingdom operations. Since
      we
      do not believe that the related tax benefit of those losses will be realized,
      a
      valuation allowance was recorded against the deferred tax assets associated
      with
      those foreign losses. In addition, the effective tax rate was unfavorably
      impacted by the expiration of the federal
      research and development tax credit at December 31, 2007.








***Six
      Months Ended June 30, 2008 Compared to Six Months Ended June 30,
      2007***





*Net
      Sales.* Net
      sales for our reportable segments, excluding inter-segment sales, for the six
      months ended June 30, 2008 and 2007 are summarized in the following table (in
      thousands):


**Six
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**
              
              **(Decrease)**Electronics
              
              $
              282,632
              
              
              67.9
              %
              
              $
              218,476
              
              
              59.2
              %
              
              $
              64,156
              
              
              29.4
              %Control
                  Devices
              
              
              133,667
              
              
              32.1
              
              
              
              150,354
              
              
              40.8
              
              
              
              (16,687
              )
              
              (11.1
              )%Total
                  net sales
              
              $
              416,299
              
              
              100.0
              %
              
              $
              368,830
              
              
              100.0
              %
              
              $
              47,469
              
              
              12.9
              %





The
      increase in net sales for our Electronics segment was primarily due to new
      business sales in North America, increased sales volume in our European
      commercial vehicle operations and favorable foreign currency exchange rates.
      Favorable foreign currency exchange rates contributed $8.5 million to sales
      in
      the first six months of 2008 compared with the first six months of the prior
      year. The increase was partially offset by lower sales volumes to our North
      American commercial vehicle markets.





The
      decrease in net sales for our Control Devices segment was primarily attributable
      to production volume reductions at our major customers in the automotive vehicle
      market and the loss of sensor product revenue at our Sarasota, Florida,
      facility .




25


Net
      sales
      by geographic location for the six
      months ended June 30,
      2008 and 2007 are summarized in the following table (in thousands):


**Six
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**
              
              **(Decrease)**North
                  America
              
              $
              303,299
              
              
              72.9
              %
              
              $
              266,510
              
              
              72.3
              %
              
              $
              36,789
              
              
              13.8
              %Europe
                  and other
              
              
              113,000
              
              
              27.1
              
              
              
              102,320
              
              
              27.7
              
              
              
              10,680
              
              
              10.4
              %Total
                  net sales
              
              $
              416,299
              
              
              100.0
              %
              
              $
              368,830
              
              
              100.0
              %
              
              $
              47,469
              
              
              12.9
              %






The
      increase in North American sales was primarily attributable to new business
      sales of electronics products. The increase was partially offset by lower sales
      volume in our North American automotive and commercial vehicle markets. Our
      increase in sales outside North America for the first six months was primarily
      due to increased European commercial vehicle sales volume and favorable foreign
      currency exchange rates. The favorable effect of foreign currency exchange
      rates
      affected net sales outside North America by $8.7 million in the first six months
      of 2008 compared with the first six months of the prior year.




Condensed
      consolidated statements of operations as a percentage of net sales for the six
      months ended June
      30,
      2008 and 2007 are presented in the following table (in thousands):


**Six
                  Months Ended****June
                  30,**
              
              
              **$
                  Increase /****2008**
              
              
              **2007**
              
              
              **(Decrease)**Net
                  Sales
              
              $
              416,299
              
              
              100.0
              %
              
              $
              368,830
              
              
              100.0
              %
              
              $
              47,469Costs
                  and Expenses:Cost
                  of goods sold
              
              
              315,128
              
              
              75.7
              
              
              
              287,101
              
              
              77.8
              
              
              
              28,027Selling,
                  general and administrative
              
              
              73,021
              
              
              17.5
              
              
              
              66,730
              
              
              18.1
              
              
              
              6,291(Gain)
                  Loss on sale of property, plantand
                  equipment, net
              
              
              145
              
              
              0.0
              
              
              
              (1,688
              )
              
              (0.5
              )
              
              
              1,833Restructuring
              
              
              3,135
              
              
              0.8
              
              
              
              72
              
              
              0.0
              
              
              
              3,063-Operating
                  Income
              
              
              24,870
              
              
              6.0
              
              
              
              16,615
              
              
              4.5
              
              
              
              8,255Interest
                  expense, net
              
              
              10,252
              
              
              2.5
              
              
              
              11,103
              
              
              3.0
              
              
              
              (851
              )Equity
                  in earnings of investees
              
              
              (6,835
              )
              
              (1.6
              )
              
              
              (4,418
              )
              
              (1.2
              )
              
              
              (2,417
              )Loss
                  on early extinguishment of debt
              
              
              770
              
              
              0.2
              
              
              
              -
              
              
              -
              
              
              
              770Other
                  expense, net
              
              
              278
              
              
              0.0
              
              
              
              512
              
              
              0.1
              
              
              
              (234
              )Income
                  Before Income Taxes
              
              
              20,405
              
              
              4.9
              
              
              
              9,418
              
              
              2.6
              
              
              
              10,987Provision
                  for income taxes
              
              
              9,174
              
              
              2.2
              
              
              
              1,853
              
              
              0.5
              
              
              
              7,321Net
                  Income
              
              $
              11,231
              
              
              2.7
              %
              
              $
              7,565
              
              
              2.1
              %
              
              $
              3,666





*Cost
      of Goods Sold.*  The
      decrease in cost of goods sold as a percentage of sales was due to a more
      favorable product mix and new business sales. The decrease was partially offset
      by $3.0 million of restructuring expenses included in cost of goods sold in
      the
      first half of 2008.





*Selling,
      General and Administrative Expenses.* Product
      development expenses included in SG&A were $25.5 million and $21.8 million
      for the six months ended June 30, 2008 and 2007, respectively. The increase
      was
      primarily due to development spending in the areas of instrumentation and
      wiring.





The
      increase in SG&A expenses, excluding product development expenses, for the
      first six months of 2008 compared with the first six months of 2007 was
      primarily attributable to the increase in consulting and compensation related
      expenses.




26




*(Gain)
      Loss on Sale of Property, Plant and Equipment, net.* The gain
      during the first half of 2007 was primarily attributable to the sale
      of
      two closed facilities.





*Restructuring
      Charges.* The
      increase in restructuring charges that were general and administrative in
      nature, was primarily the result of the ratable recognition of one-time
      termination benefits that will be due to employees upon the closure of our
      Sarasota, Florida, and Mitcheldean, United Kingdom, locations. No fixed-asset
      impairment charges were incurred because assets are expected to be transferred
      to our other locations for continued production. Restructuring expenses that
      were general and administrative in nature were included in the Company’s
      condensed consolidated statements of operations as restructuring charges, while
      the remaining restructuring related expenses were included in cost of goods
      sold. We expect these initiatives to be substantially completed in
      2008.





Restructuring
      charges, general and administrative in nature, recorded by reportable segment
      during the six months ended June 30, 2008 were as follows (in
      thousands):


**Six
                  Months Ended****June
                  30, 2008****Electronics**
              
              **Control
                  Devices**
              
              **Total
                  Consolidated Restructuring Charges**Severance
                  costs
              
              $
              1,692
              
              $
              740
              
              $
              2,432Other
                  exit costs
              
              
              18
              
              
              685
              
              
              703Total
                  general and administrative restructuring charges
              
              $
              1,710
              
              $
              1,425
              
              $
              3,135





Severance
      costs related to a reduction in workforce. Other exit costs include
      miscellaneous expenditures associated with exiting business activities.





Restructuring
      charges, general and administrative in nature, recorded by reportable segment
      during the six months ended June 30, 2007 were as follows (in
      thousands):


**Six
                  Months Ended****June
                  30, 2007****Electronics**
              
              **Control
                  Devices**
              
              **Total
                  Consolidated Restructuring Charges**Severance
                  costs
              
              $
              72
              
              $
              -
              
              $
              72Total
                  general and administrative restructuring charges
              
              $
              72
              
              $
              -
              
              $
              72





Restructuring
      related expenses, general and administrative in nature, for the first six months
      of 2007 were due to severance costs related to the rationalization of certain
      manufacturing facilities in North America that were previously announced in
      2005. These restructuring initiatives were completed in 2007.





*Equity
      in Earnings of Investees.* The
      increase in equity earnings of investees was predominately attributable to
      the
      increase in equity earnings recognized from our PST joint venture. The increase
      primarily reflects higher volume for PST’s security product lines and favorable
      exchange rates.




27




*Income
      Before Income Taxes.* Income
      before income taxes is summarized in the following table by reportable segment
      (in thousands).


**Six
                    Months Ended**June
                  30,
              
              **$
                  Increase /**
              
              **%
                  Increase /****2008**
              
              **2007**
              
              **(Decrease)**
              
              **(Decrease)**Electronics
              
              $
              25,975
              
              $
              6,141
              
              $
              19,834
              
              
              323.0
              %Control
                  Devices
              
              
              1,091
              
              
              10,887
              
              
              (9,796
              )
              
              (90.0
              )%Other
                  corporate activities
              
              
              3,646
              
              
              3,521
              
              
              125
              
              
              3.6
              %Corporate
                  interest expense, net
              
              
              (10,307
              )
              
              (11,131
              )
              
              824
              
              
              7.4
              %Income
                  before income taxes
              
              $
              20,405
              
              $
              9,418
              
              $
              10,987
              
              
              116.7
              %








The
        increase in income before income taxes in the Electronics segment was related
        to
        increased revenue and favorable product mix. These
        factors were partially offset by higher restructuring related expenses and
        higher SG&A expenses due to increased development spending in the areas of
        instrumentation and wiring.


The
      decrease in income before income taxes in the Control Devices reportable segment
      was primarily due to lower revenue and increased restructuring related expenses.
      The decrease was partially offset by operating inefficiencies related to a
      new
      product launch in the first quarter of 2007.





Income
      before income taxes by geographic location for the six
      months ended June 30,
      2008 and 2007 is summarized in the following table (in thousands):


**Six
                  Months Ended**
              
              
              **$
                  Increase /**
              
              **%
                  Increase /****June
                  30, 2008**
              
              
              **June
                  30, 2007**
              
              
              **(Decrease)**
              
              **(Decrease)**North
                  America
              
              $
              18,136
              
              
              88.9
              %
              
              $
              3,825
              
              
              40.6
              %
              
              $
              14,311
              
              
              374.1
              %Europe
                  and other
              
              
              2,269
              
              
              11.1
              
              
              
              5,593
              
              
              59.4
              
              
              
              (3,324
              )
              
              (59.4
              )%Income
                  before income taxes
              
              $
              20,405
              
              
              100.0
              %
              
              $
              9,418
              
              
              100.0
              %
              
              $
              10,987
              
              
              116.7
              %




The
      increase in our profitability in North America was primarily attributable to
      new
      business sales and additional sales volume to existing customers, primarily
      from
      electronic products. The increase was primarily offset by increased
      restructuring related expenses and lower North American automotive and
      commercial vehicle production. The decrease in profitability outside North
      America was primarily due to increased restructuring related and design and
      development expenses. The decrease was partially offset by increased European
      commercial vehicle production.





*Provision
      for Income Taxes.*  We
      recognized a provision for income taxes of $9.2 million, or 45.0% of pre-tax
      income, and $1.9 million, or 19.7% of the pre-tax income, for federal, state
      and
      foreign income taxes for the six months ended June 30, 2008 and 2007,
      respectively. The
      increase in the effective tax rate for the second quarter ended June 30, 2008
      compared to the second quarter ended June 30, 2007, was primarily attributable
      to the costs incurred to restructure our United Kingdom operations. Since
      we
      do not believe that the related tax benefit of those losses will be realized,
      a
      valuation allowance was recorded against the deferred tax assets associated
      with
      those foreign losses. In addition, the effective tax rate was unfavorably
      impacted by the expiration of the federal
      research and development tax credit at December 31, 2007.




28




***Liquidity
      and Capital Resources***





*Summary
      of Cash Flows (in thousands):*


**Six
                  Months Ended****June
                  30,**
              
              **$
                  Increase /****2008**
              
              **2007**
              
              **(Decrease)**Cash
                  provided by (used for):Operating
                  activities
              
              $
              12,574
              
              $
              4,019
              
              $
              8,555Investing
                  activities
              
              
              (12,314
              )
              
              (5,863
              )
              
              (6,451
              )Financing
                  activities
              
              
              (16,391
              )
              
              1,796
              
              
              (18,187
              )Effect
                  of exchange rate changes on cash and cash equivalents
              
              
              1,549
              
              
              232
              
              
              1,317Net
                  change in cash and cash equivalents
              
              $
              (14,582
              )
              $
              184
              
              $
              (14,766
              )





The
      increase in net
      cash
      provided by operating activities was primarily due to higher earnings and higher
      accounts payable balances in the current year. The increase in cash provided
      by
      operating activities was partially offset by higher accounts receivable balances
      due to increased revenues and by cash used for our restructuring initiatives,
      primarily to build inventory levels for line-transfers, which will decline
      as
      production transfers to our other facilities.





The
      decrease in net cash used for investing activities reflects a decrease in cash
      used for capital projects offset by $1.1 million of cash used to acquire a
      Swedish aftermarket distributor of Stoneridge products in the first quarter
      of
      2008.





The
      increase in net cash used by financing activities was primarily due to cash
      used
      to purchase and retire $17.0 million in par value of the Company’s senior notes
      in the first half of 2008.





Future
      capital expenditures are expected to be consistent with recent levels.
      Management will continue to focus on reducing its weighted average cost of
      capital and believes that cash flows from operations and the availability of
      funds from our credit facilities will provide sufficient liquidity to meet
      our
      future growth and operating needs.





As
      outlined in Note 6 to our condensed consolidated financial statements, on
      November 2, 2007, we finalized our new asset-based credit facility ,
      which
      permits borrowing up to a maximum level of $100.0 million. This
      facility provides us with lower borrowing rates and allows us the flexibility
      to
      refinance our outstanding debt. At
      June
      30, 2008, there were no borrowings on this asset-based credit facility. At
      June
      30, 2008, the Company had borrowing capacity of $90.9 million based on eligible
      current assets, as defined by the credit agreement .
      The
      Company was in compliance with all covenants at June 30, 2008.





As
      of
      June 30, 2008, the Company’s $183.0 million of senior notes were redeemable at
      103.833 percent of the principal amount. Given the Company’s senior notes are
      redeemable, we may seek to retire the senior notes through redemptions, cash
      purchases, open market purchases, privately negotiated transactions or
      otherwise. Such redemptions, purchases or exchanges, if any, will depend on
      prevailing market conditions, our liquidity requirements, contractual
      restrictions and other factors. The amounts involved may be material. During
      the
      first half of 2008, we purchased and retired $17.0 million in face value of
      the
      Company’s senior notes.





We
      announced restructuring initiatives in the fourth quarter of 2007 and expect
      them to be substantially complete by December 31, 2008. We
      anticipate incurring total pre-tax charges of approximately $9.0 million to
      $13.0 million in 2008 for the restructuring, net of the expected gain on the
      future sale of our Sarasota, Florida, facility, which may or may not occur
      in
      2008. We currently estimate a pre-tax gain on the expected facility sale to
      be
      in the range of $3.0 million to $4.0 million.





There
      have been no material changes to the table of contractual obligations presented
      on page 24 of the Company’s 2007 Form 10-K.




29




***Critical
      Accounting Policies and Estimates***





The
      Company’s significant accounting policies, which include management’s best
      estimates and judgments, are included in Item 7, Part II to the consolidated
      financial statements of the Company’s 2007 Form 10-K. Certain of these
      accounting policies are considered critical as disclosed in the Critical
      Accounting Policies and Estimates section of Management’s Discussion and
      Analysis of the Company’s 2007 Form 10-K because of the potential for a
      significant impact on the financial statements due to the inherent uncertainty
      in such estimates. There have been no significant changes in the Company’s
      critical accounting policies since December 31, 2007.





***Inflation
      and International Presence***





Given
      the
      current economic climate and recent increases in certain commodity prices,
      we
      believe that a continuation of such price increases would significantly affect
      our profitability. Furthermore, by operating internationally, we are affected
      by
      the economic conditions of certain countries. Based on the current economic
      conditions in these countries, we believe we are not significantly exposed
      to
      adverse economic conditions.





***Forward-Looking
      Statements***





Portions
      of this report contain “forward-looking statements” under the Private Securities
      Litigation Reform Act of 1995. These statements appear in a number of places
      in
      this report and include statements regarding the intent, belief or current
      expectations of the Company, with respect to, among other things, our (i) future
      product and facility expansion, (ii) acquisition strategy, (iii) investments
      and
      new product development, and (iv) growth opportunities related to awarded
      business. Forward-looking statements may be identified by the words “will,”
“may,” “designed to,” “believes,” “plans,” “expects,” “continue,” and similar
      words and expressions. The forward-looking statements in this report are subject
      to risks and uncertainties that could cause actual events or results to differ
      materially from those expressed in or implied by the statements. Important
      factors that could cause actual results to differ materially from those in
      the
      forward-looking statements include, among other factors:





·
            the
                loss or bankruptcy of a major customer or
                supplier;


·
            the
                costs and timing of facility closures, business realignment, or similar
                actions;


·
            a
                significant change in automotive, medium- and heavy-duty, agricultural
                or
                off-highway vehicle production;


·
            our
                ability to achieve cost reductions that offset or exceed customer-mandated
                selling price reductions;


·
            a
                significant change in general economic conditions in any of the various
                countries in which we operate;


·
            labor
                disruptions at our facilities or at any of our significant customers
                or
                suppliers;


·
            the
                ability of our suppliers to supply us with parts and components at
                competitive prices on a timely
                basis;


·
            the
                amount of debt and the restrictive covenants contained in our credit
                facility;


·
            customer
                acceptance of new products;


·
            capital
                availability or costs, including changes in interest rates or market
                perceptions;


·
            the
                successful integration of any acquired
                businesses;


·
            the
                occurrence or non-occurrence of circumstances beyond our control;
                and


·
            those
                items described in Part I, Item IA (“Risk Factors”) of the Company’s 2007
                Form 10-K.





**Item
      3.** **Quantitative
      and Qualitative Disclosures About Market Risk** **.**





***Interest
      Rate Risk***





From
      time
      to time, we are exposed to certain market risks, primarily resulting from the
      effects of changes in interest rates. At June 30, 2008, however, all of our
      debt
      was fixed rate debt. At this time, we do not intend to use financial instruments
      to manage this risk.





***Commodity
      Price Risk***





Given
      the
      current economic climate and the recent increases in certain commodity costs,
      we
      presently are experiencing an increased risk, particularly with respect to
      the
      purchase of copper, zinc, resins and certain other commodities. We manage this
      risk through a combination of fixed price agreements, staggered short-term
      contract maturities and commercial negotiations with our suppliers. We may
      also
      consider pursuing alternative commodities or alternative suppliers to mitigate
      this risk over a period of time. The recent increases in certain commodity
      costs
      have negatively affected our operating results, and a continuation of such
      price
      increases could significantly affect our profitability.




30







We
      entered into fixed price swap contracts for 480 and 420 metric tonnes of copper
      in December 2006 and January 2007, respectively. These contracts fixed the
      cost
      of a portion of our copper purchases in 2007 and expired on December 31, 2007.
      In December 2007, we entered into a fixed price swap contract for 1.0 million
      pounds of copper, which will last through December 2008. The purpose of these
      contracts is to reduce our price risk as it relates to copper prices.





Going
      forward, we believe that our mitigation efforts will offset a substantial
      portion of the financial impact of these increased costs. However, no assurances
      can be given that the magnitude or duration of these increased costs will not
      have a material impact on our future operating results. A hypothetical pre-tax
      gain or loss in fair value from a 10.0% favorable or adverse change in commodity
      prices would not significantly affect our results of operations, financial
      position or cash flows.





***Foreign
      Currency Exchange Risk***





We
      have
      currency exposures related to buying, selling and financing in currencies other
      than the local currency in which we operate. In some instances, we choose to
      reduce our exposures through financial instruments that provide offsets or
      limits to our exposures. Currently, our most significant currency exposures
      relate to the Mexican peso and British pound. We have used derivative financial
      instruments, including foreign currency forward and option contracts, to
      mitigate our exposure to fluctuations in foreign currency exchange rates by
      reducing the effect of such fluctuations on foreign currency denominated
      intercompany transactions and other known foreign currency exposures.





As
      discussed in Note 3 to our condensed consolidated financial statements, we
      have
      entered into foreign currency forward contracts related to our British pound
      exposures. The existing foreign currency forward contracts at June 30, 2008
      and
      December 31, 2007 had a notional value of $8,239 and $8,551, respectively.
      The
      estimated net fair value of these contracts at June 30, 2008 and December 31,
      2007, per quoted market sources, was approximately $124 and $(28),
      respectively.





We
      do not
      expect the effects of this risk to be material in the future based on the
      current operating and economic conditions in the countries in which we operate.
      A hypothetical pre-tax gain or loss in fair value from a 10.0% favorable or
      adverse change in quoted foreign currencies would not significantly affect
      our
      results of operations, financial position or cash flows.





**Item
      4. Controls and Procedures.**





***Evaluation
      of Disclosure Controls and Procedures***




As
      of
      June 30, 2008, an evaluation was performed under the supervision and with the
      participation of the Company’s management, including the chief executive officer
      (CEO) and chief financial officer (CFO), of the effectiveness of the design
      and
      operation of the Company’s disclosure controls and procedures. Based on that
      evaluation, the Company’s management, including the CEO and CFO, concluded that
      the Company’s disclosure controls and procedures were effective as of June 30,
      2008.





***Changes
      in Internal Control Over Financial Reporting***





There
      were no changes in the Company’s internal control over financial reporting
      during the six
      months ended
      June 30, 2008 that materially affected, or are reasonably likely to materially
      affect, the Company’s internal control over financial reporting.




31




**PART
      II-OTHER INFORMATION**





**Item
      1. Legal Proceedings.**





The
      Company is involved in certain legal actions and claims arising in the ordinary
      course of business. The Company, however, does not believe that any of the
      litigation in which it is currently engaged, either individually or in the
      aggregate, will have a material adverse effect on its business, consolidated
      financial position or results of operations. The Company is subject to the
      risk
      of exposure to product liability claims in the event that the failure of any
      of
      its products causes personal injury or death to users of the Company’s products
      and there can be no assurance that the Company will not experience any material
      product liability losses in the future. In addition, if any of the Company’s
      products prove to be defective, the Company may be required to participate
      in
      government-imposed or other instituted recalls involving such products. The
      Company maintains insurance against such liability claims.





**Item
      1A. Risk Factors.**





There
      were no material changes from risk factors previously disclosed in the Company’s
      Annual Report on Form 10-K for the fiscal year ended December 31,
      2007.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





None.





**Item
      3. Defaults Upon Senior Securities.**





None.





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


(a)
              The
                  Annual Meeting of Shareholders of Stoneridge, Inc. was held on
                  May 5,
                  2008.
 
 (b)
              The
                  following matters were submitted to a vote at the
                  meeting:
  The
        election of the following nominees as directors of the Company. The vote
        with
        respect to each nominee was as follows:


Nominee
            
            For
            
            WithheldJohn
                C. Corey
            
            
            21,767,638
            
            
            
            450,706Jeffrey
                P. Draime
            
            
            21,780,512
            
            
            
            437,832Sheldon
                J. Epstein
            
            
            21,782,004
            
            
            
            436,340Douglas
                C. Jacobs
            
            
            21,850,386
            
            
            
            367,958Kim
                Korth
            
            
            21,850,286
            
            
            
            368,058William
                M. Lasky
            
            
            21,850,148
            
            
            
            368,196Earl
                L. Linehan
            
            
            21,704,944
            
            
            
            513,400





The
      ratification of the appointment of Ernst & Young LLP as the Company’s
      independent registered public accounting firm for the year ended December 31,
      2008. The results of the vote were as follows:




For
            
            Against
            
            AbstainRatify
                Appointment of Accounting Firm
            
            22,179,298
            
            35,416
            
            3,631




**Item
      5. Other Information.**





None.





**Item
      6. Exhibits.**





Reference
      is made to the separate, “Index to Exhibits,” filed herewith.




32




**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.





STONERIDGE,
              INC.Date:
                August 7, 2008
            /s/
                John C. CoreyJohn
                C. Corey
              *President
                and Chief Executive Officer*(Principal
                Executive Officer)Date:
                August 7, 2008
            /s/
                George E. StricklerGeorge
                E. Strickler*Executive
                Vice President, Chief Financial Officer and
                Treasurer*(Principal
                Financial and Accounting Officer)






33




**INDEX
      TO EXHIBITS**





ExhibitNumber
            Exhibit31.1
            Chief
                Executive Officer certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002, filed herewith.31.2
            Chief
                Financial Officer certification pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002, filed herewith.32.1
            Chief
                Executive Officer certification pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                filed
                herewith.32.2
            Chief
                Financial Officer certification pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                filed
                herewith.







34