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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 10-K
            X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1996

                                       OR

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

                         Commission File Number 2-54754



                   General American Transportation Corporation

Incorporated in the                         IRS Employer Identification Number
 State of New York                                     36-2827991

                             500 West Monroe Street
                          Chicago, Illinois 60661-3676
                                 (312) 621-6200

           Securities registered pursuant to Section 12(b) of the Act:

                                      None


           Securities registered pursuant to Section 12(g) of the Act:

                                      None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
                                             ---  ---
     Registrant had 1,000 shares of common stock  outstanding (all owned by GATX
Corporation) as of March 7, 1997.

     General American Transportation  Corporation meets the conditions set forth
in General  Instruction  J(1) of Form 10-K and,  therefore,  is filing this form
with the reduced disclosure format.





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<PAGE>




PART I


Item 1.  Business

General American Transportation  Corporation (GATC) is a wholly-owned subsidiary
of GATX  Corporation  (GATX) and is engaged in the  leasing  and  management  of
railroad  tank cars and  specialized  freight  cars and  through a  wholly-owned
subsidiary  owns and operates  tank  storage  terminals,  pipelines  and related
facilities.

Industry Segments

                         RAILCAR LEASING AND MANAGEMENT

The Railcar Leasing and Management  segment  (Transportation),  headquartered in
Chicago,  Illinois,  is  principally  engaged in leasing  specialized  railcars,
primarily  tank cars,  under full service  leases.  As of December 31, 1996, its
North American  fleet  consisted of  approximately  77,500  railcars,  including
60,400 tank cars and 17,100  specialized  freight cars,  primarily  Airslide(TM)
covered  hopper  cars and plastic  pellet  cars.  In addition to roughly  66,900
railcars in the United States,  Transportation has approximately  9,000 railcars
in its Canadian fleet and 1,600  railcars in its Mexican  fleet.  Transportation
has upgraded its fleet over time by adding new larger capacity cars and retiring
older smaller  capacity  cars.  Transportation's  railcars have a useful life of
approximately   30  to  33  years.   The   average   age  of  the   railcars  in
Transportation's fleet is approximately 16 years.

The  following  table  sets forth the  approximate  tank car fleet  capacity  of
Transportation  as of the end of each of the years  indicated  and the number of
cars of all types  added to  Transportation's  fleet  during  such  years;  1996
additions include 8,700 cars from Transportation's  acquisition of the remaining
interest in its Canadian subsidiary, CGTX, Inc.

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                ------------------------------------------------
                                  1996       1995       1994      1993     1992
                                -------     -----      -----     -----   -------
<S>                             <C>         <C>        <C>       <C>      <C>  
Tank car fleet capacity
  (in millions of gallons)       1,353      1,176      1,090     1,024      993

Number of railcars added to          
     North American fleet       13,200      6,200      4,900     3,000    1,600
</TABLE>

Transportation's   customers  use  its  railcars  to  ship  over  700  different
commodities,  primarily  chemicals,  petroleum,  and food  products.  For  1996,
approximately  53% of railcar leasing  revenue was  attributable to shipments of
chemical products, 23% to petroleum products, and 18% to food products.  Many of
these products require cars with special features;  Transportation offers a wide
variety of sizes and types of cars to meet these  needs.  Transportation  leases
railcars  to over  700  customers,  including  major  chemical,  oil,  food  and
agricultural  companies.  No single customer  accounts for more than 3% of total
railcar leasing revenue.

Transportation typically leases new railcars to its customers for a term of five
years or  longer,  whereas  renewals  or leases of used cars are  typically  for
periods  ranging from less than a year to seven years with an average lease term
of about three years.  The utilization rate of  Transportation's  railcars as of
December 31, 1996 was approximately 95%.


                                       -1-


<PAGE>



Under  its full  service  leases,  Transportation  maintains  and  services  its
railcars,  pays ad valorem taxes, and provides many ancillary services.  Through
its Car Status Service System,  for example,  Transportation  provides customers
with timely information about the location and readiness of their leased cars to
enhance and maximize the  utilization  of this  equipment.  Transportation  also
maintains a network of major service centers consisting of four domestic,  three
Canadian and one Mexican service  center,  and 37 mobile trucks in 26 locations.
Transportation also utilizes independent third-party repair shops.

Transportation purchases most of its new railcars from Trinity Industries,  Inc.
(Trinity), a Dallas-based metal products manufacturer,  under a contract entered
into in 1984 and extended from time to time  thereafter,  most recently in 1992.
Transportation  anticipates  that through this  contract it will  continue to be
able to satisfy  its  customers'  new car lease  requirements.  Transportation's
engineering   staff  provides   Trinity  with  design   criteria  and  equipment
specifications,  and works with  Trinity's  engineers to develop new  technology
where  needed in order to upgrade or improve car  performance  or in response to
regulatory requirements.

The full-service railcar leasing industry is comprised of Transportation,  Union
Tank Car Company,  General Electric Railcar Services  Corporation,  Shippers Car
Line division of ACF Industries,  Incorporated, Procor Limited, and many smaller
companies. Of the approximately 215,000 tank cars owned and leased in the United
States at December 31, 1996,  Transportation had approximately 54,200. Principal
competitive factors include price, service and availability.

                             TERMINALS AND PIPELINES

GATX Terminals Corporation  (Terminals) is engaged in the storage,  handling and
intermodal  transfer of petroleum and chemical  commodities at key points in the
bulk liquid  distribution  chain.  All of its  terminals  are located near major
distribution  and  transportation  points and most are capable of receiving  and
shipping bulk liquids by ship, rail, barge and truck. Many of the terminals also
are linked with major interstate pipelines. In addition to storing, handling and
transferring bulk liquids,  Terminals  provides blending and testing services at
most of its facilities. Terminals,  headquartered in Chicago, Illinois, owns and
operates 26 terminals in 11 states,  and seven  terminals in the United Kingdom.
Terminals  also has joint  venture  interests  in 14  international  facilities.
Additionally, Terminals owns or holds interests in four refined product pipeline
systems.

As of December 31, 1996,  Terminals had a total  storage  capacity of 73 million
barrels. This includes 54 million barrels of bulk liquid storage capacity in the
United States,  7 million barrels in the United Kingdom,  and an equity interest
in another 12 million barrels of storage capacity in Europe,  Mexico and the Far
East.  Terminals' smallest bulk liquid facility has a storage capacity of 95,000
barrels while its largest facility,  located in Pasadena,  Texas, has a capacity
of over 12 million  barrels.  Capacity  utilization  at Terminals'  wholly owned
facilities  was 89% at the end of 1996;  throughput for the year was 705 million
barrels.

For 1996, 54% of Terminals' revenue was derived from petroleum storage, 25% from
chemical  storage,  20% from pipelines,  and 1% from other products.  Demand for
Terminals'  facilities  depends in part upon demand for  petroleum  and chemical
products and is also affected by refinery output, foreign imports,  availability
of  other  storage  facilities,  and the  expansion  of its  customers  into new
geographical markets.


                                       -2-

<PAGE>




Terminals serves over 350 customers,  including major oil and chemical companies
as well as trading firms and larger  independent  refiners.  No single  customer
accounts for more than 4% of Terminals' revenue.  Customer service contracts are
both short term and long term.

Terminals along with two Dutch companies, Paktank N.V. and Van Ommeren N.V., are
the three major international public terminaling companies.  The domestic public
terminaling    industry    consists   of   Terminals,    Paktank    Corporation,
International-Matex  Tank Terminals,  and many smaller  independent  terminaling
companies.  In  addition  to  public  terminaling  companies,  oil and  chemical
companies also have significant storage capacity and compete with Terminals in a
number of markets.  Terminals'  pipelines  compete  with rail,  trucks and other
pipelines  for  movement of liquid  petroleum  products.  Principal  competitive
factors  include  price,  location  relative  to  distribution  facilities,  and
service.

Trademarks, Patents and Research Activities
-------------------------------------------
Patents,  trademarks,  licenses, and research and development activities are not
material to GATC's businesses taken as a whole.

Customer Base
-------------
GATC and its  subsidiaries  are not  dependent  upon a single  customer or a few
customers. The loss of any one customer would not have a material adverse effect
on any segment or GATC as a whole.

Employees
---------
GATC and its subsidiaries have approximately 1,900 active employees, of whom 36%
are hourly employees covered by union contracts.

Item 2.  Properties
-------------------
Information  regarding the location and general character of certain  properties
of GATC is included in Item 1, Business, of this document.  The major portion of
Terminals' land is owned; the balance, including some of its dock facilities, is
leased.

Item 3.  Legal Proceedings
--------------------------
On July 14, 1995,  a judgment in the amount of $9.7 million was entered  against
GATC by the U.S.  District  Court for the  Northern  District of Illinois in the
matter  of  General   American   Transportation   Corporation   v.   Cryo-Trans,
Incorporated  (Case  No.  91  C  1305),  a  case  involving  an  alleged  patent
infringement by GATC in the construction and use of its ArcticarTM cryogenically
cooled railcar. GATC was also permanently enjoined from any further infringement
of the patent.  The Federal  Circuit  Court of Appeals has reversed the judgment
against  GATC,  and the appellant has filed a motion for an appeal to the United
States Supreme Court.  Even in the event of an adverse decision on appeal to the
Supreme Court and reinstatement of the original judgment against GATC, GATC does
not believe the costs  associated with the disposition of the affected cars will
have a material adverse effect on GATC.

In November of 1995, the New Jersey Department of Environmental Protection (the
"DEP") served GATX Terminals Corporation with a Notice of Violation alleging 
that during 1994 and 1995 the marine vapor recovery units at its Carteret, New
Jersey facility produced emissions of carbon monoxide in excess of limits 
allowed by operating permits for those units.  The violation was the result of a
design flaw in the vapor recovery equipment, which was promptly corrected.  
Terminals and the DEP are currently negotiating a resolution of the violation, 
which could result in the assessment of a monetary penalty against Terminals in
excess of $100,000.


                                       -3-

<PAGE>



     Various  lawsuits  have been filed in the  Superior  Court for the State of
California and served upon Terminals,  Calnev Pipe Line Company, or another GATX
subsidiary  seeking an unspecified amount of damages arising out of the May 1989
explosion in San Bernardino, California. Those suits, all of which were filed in
the County of San Bernardino unless otherwise indicated, are: Aguilar, et al, v.
Calnev  Pipe Line  Company,  et al,  filed  February  1990 in the  County of Los
Angeles (No.  0751026);  Alba, et al, v. Southern  Pacific  Railroad Co., et al,
filed  November 1989 (No.  252842) and dismissed  April 1996;  Terry,  et al, v.
Southern  Pacific,  et al, filed December 1989 (No.  253604) and dismissed March
1996;  Charles,  et al, v. Calnev Pipe Line,  Inc.,  et al,  filed May 1990 (No.
256269) and settled March 1996;  Mary  Washington v.  Southern  Pacific,  et al,
filed May 1990 (No. 256346) and settled March 1995;  Stewart, et al, v. Southern
Pacific  Railroad Co., et al, filed May 1990 (No. 256464) and settled May 1994 ;
Pearson v. Calnev Pipe Line Company,  et al, filed May 1990 in the County of San
Bernardino (No.  256206);  Pollack v. Southern  Pacific  Transportation,  et al,
filed May 1992 (No. 271247); Davis v. Calnev Pipe Line Company, et al, filed May
1990 (No. 256207); J. Roberts, et al, v. Southern Pacific Transportation, et al,
filed  November  1992 (No.  275936) and  dismissed  June 1995;  Irby,  et al, v.
Southern  Pacific,  et al, (No.  255715)  filed April 1990 and settled May 1994;
Reese, et al, v. Southern Pacific, et al (No. 256434) filed May 1990 and settled
May 1994;  Nancy  Washington,  et al, v. Southern  Pacific,  et al, (No. 256435)
filed May 1990 and settled  April 1994. As  Terminals'  insurance  carriers have
assumed the defense of these  lawsuits  without a reservation of rights and have
paid all of the  settlements  entered  into  between the  parties to date,  GATC
believes that the likelihood of a material adverse effect on GATC's consolidated
financial position or operations is remote.

Item 4.  Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------
Not required.


PART II

Item 5.  Market for the Registrant's Common Stock and Related Shareholder 
          Matters
--------------------------------------------------------------------------
GATX Corporation owns all of the outstanding common stock of GATC.

Item 6.  Selected Financial Data
---------------------------------
Not required.

Item 7. Management's Discussion and Analysis of Financial Condition and Results 
          of Operations
--------------------------------------------------------------------------------
GATC on a  consolidated  basis  reported  net  income  of $80  million  for 1996
compared to $94 million in 1995 and $87 million in 1994. The decrease was due to
sharply  lower  earnings  at  Terminals,  offset in part by record  earnings  at
Transportation.  Terminals'  results  were  down  primarily  as  the  result  of
historically  low petroleum  inventory levels and lower pricing due to increased
competition.  Transportation benefited from a record number of railcars on lease
and the mid-1996 acquisition of the remaining interest in CGTX, Transportation's
Canadian railcar affiliate.

Operating  results at  Transportation  improved in 1995  compared to 1994 due to
significantly  more  railcars  on lease and  higher  income on  invested  funds.
Terminals'  1995 net income  decreased  slightly  from  1994's  record  level as
capacity utilization declined at certain terminal locations.


                                       -4-

<PAGE>




GROSS INCOME

Consolidated gross income for 1996 of $763 million exceeded 1995 revenue of $709
million and 1994 revenue of $643 million.

Transportation's  gross income of $428 million  increased $67 million from 1995.
The  acquisition of the remaining 55% interest in CGTX accounted for $27 million
of the increase; previously the 45% interest had been accounted for as an equity
investment. The remainder of the revenue increase is due to the full year effect
of a record number of railcar  additions in 1995,  another  strong year of fleet
additions in 1996, and an increase in average  rental rates.  In addition to the
8,700 cars at CGTX,  over  4,400  cars were  added in 1996.  At the end of 1996,
Transportation had 73,200 railcars on lease in North America. With a total fleet
of 77,500 cars,  utilization  ended the year at 95%, up from 94%  utilization at
the end of 1995. Fleet additions in 1997 are expected to remain strong.

Terminals' gross income for 1996 of $298 million was 5% less than 1995 resulting
from general softness in both the domestic and international  petroleum markets.
The  petroleum  business  environment  since  the  second  half of 1995 has been
characterized  by backwardated  markets,  historically  low petroleum  inventory
levels, and lower pricing due to increased competition.  Backwardation indicates
that the economics in the petroleum  futures  market,  as  characterized  by the
spread between spot and future  prices,  are not providing an incentive to store
product. While throughput of petroleum products remained strong, rates declined.
Throughput for 1996 of 705 million barrels at wholly-owned  locations  increased
8% from 655 million barrels last year. Average utilization for the year was 86%,
down from 1995's  average of 88%,  though  1996  year-end  utilization  was 89%.
Balanced  against the difficult  petroleum  terminaling  markets were  continued
steady chemical demand as well as good pipeline  results.  Terminals'  pipelines
serve the growing Nevada and Florida markets, and those pipelines continue to be
enhanced and expanded.

Transportation's  1995 gross income of $361 million  increased  $39 million from
1994.  Rental  revenues  increased 12%  attributable  to additional  railcars on
lease,  higher average fleet rental rates, and new operations in Mexico.  At the
end of 1995,  Transportation  had 61,400  railcars on lease in the United States
versus 56,500 at the end of 1994.  Domestic fleet  utilization of 95% at the end
of 1995 was slightly higher than the prior year.

Terminals'  record  gross  income of $313  million  in 1995,  representing  a 3%
increase over 1994, reflected incremental revenues from newly-acquired terminals
and strong petroleum  activity in the first half of 1995,  especially in the Los
Angeles  market.  However,  revenues in the latter part of 1995 reflected  lower
petroleum storage demand,  lower  utilization,  and increased price competition.
Capacity utilization at Terminals' wholly-owned facilities was 85% at the end of
1995  compared  to 94% a year  earlier.  Throughput  was  655  million  barrels,
compared to 671 million the year before.

COSTS AND EXPENSES

Operating   expenses   in  1996   increased   $24   million  or  8%  over  1995.
Transportation's  operating  expenses of $177 million increased $29 million over
1995 as a result of  increased  operating  lease  expense,  as well as increased
fleet repair costs due to the expanded fleet size,  including the newly-acquired
CGTX railcars.  Transportation  continues to utilize  sale-leasebacks to finance
its railcar  additions.  The  leaseback is recorded as an operating  lease which
removes the asset and related  liability  from the balance  sheet;  the payments
under the operating leases are recorded as operating lease expense. Fleet repair
costs  increased  10%  due  to the  expanded  fleet  size,  but  decreased  as a
percentage of revenue from 1995, in part due to the efficiencies  from the major
service  center  upgrade  program  completed  last year.  The percentage of cars
repaired at  Transportation's  service  centers  increased  to 71% from 65% last
year, indicating a


                                       -5-

<PAGE>


decreased dependence on outside contract repair shops. Throughput days, the time
it takes a railcar to be repaired  through  the  Transportation  service  center
network,  declined  from an  average  of 38  days  in  1995 to 32 days in  1996.
Terminals'  1996  operating  expenses of $159 million were $5 million lower than
1995, reflecting its reduced gross income.

Operating   expenses   in  1995   increased   $19   million  or  7%  over  1994.
Transportation's  operating  expenses of $148 million increased $19 million from
1994 as a result of increased operating lease expense and increased fleet repair
costs.  Fleet repair costs  increased  11% over 1994  reflecting  the  increased
number  of cars  repaired.  Terminals'  1995  operating  costs  of $164  million
approximated 1994 levels.

Interest expense  increased $19 million in 1996 to $118 million as the result of
higher  average  debt  balances  to fund the  growth of the  business.  Interest
expense  at  Transportation  increased  primarily  due to the CGTX  acquisition.
Interest  expense grew at Terminals as  additional  debt was incurred to finance
maintenance, regulatory and environmental expenditures, as well as the expansion
of CFPL and the acquisition of a 65% interest in an existing terminal in Mexico.
Environmental  and  maintenance  spending  continue to be significant in keeping
with  GATC's  commitment  to  improve  terminaling  assets  and to  operate  its
facilities in an environmentally responsible manner.

Interest  expense  increased $21 million in 1995 to $99 million as the result of
higher  average  debt  balances  to fund the growth of the  business  and higher
interest rates.

The  company  continues  to  utilize  interest  rate  swaps to better  match the
duration of the debt portfolio to the terms of the railcar leases. The effect of
the swaps was to reduce interest expense in 1996, 1995 and 1994.

The provision for depreciation and amortization  increased $17 million from 1995
which in turn increased $10 million over 1994. Depreciation expense increased as
result of the continued growth in assets, including the acquisition of CGTX.

Selling, general and administrative expenses of $63 million increased $8 million
from 1995 due to increased employee costs, information systems initiatives,  and
consulting  expenses,  as well as the consolidation of CGTX's operations for the
second half of 1996 and  Terminal's  rationalization  costs.  SG&A  increased $8
million in 1995 due to higher human resource  costs,  information  systems,  and
consulting expenses.

Income tax expense of $41 million  decreased  $6 million from 1995 as the result
of lower pretax  income.  The  effective tax rate for both 1996 and 1995 was 39%
and 38% for 1994.  The  effective  tax rate for all years  was  higher  than the
statutory rate because of state taxes,  foreign income, and nondeductible items.
Also,  for 1995 and 1994,  the effective rate was higher than the statutory rate
because of minority interest.

EQUITY IN NET EARNINGS OF AFFILIATED COMPANIES

Equity in net  earnings of  affiliated  companies  of $15 million  decreased  $5
million  from  1995.  Transportation's  equity  in net  earnings  of  affiliates
decreased due to CGTX being fully  consolidated  starting in July 1996; for 1995
and the first  half of 1996,  Transportation  accounted  for their 45%  interest
under the equity method.  Terminals' equity in earnings of affiliates  decreased
$3 million  from 1995  primarily  from the effects of lower  petroleum  storage,
particularly in Singapore,  partially  offset by higher earnings from a Japanese
affiliate which completed its rebuilding from the 1995 Kobe earthquake.

Equity in net earnings of affiliate of $20 million in 1995  increased $3 million
over 1994. The increase in 1995 was due to strong  chemical demand at Terminals'
European  and  Singapore  terminals  and  improved  results at CGTX.  Terminals'
newly-acquired  25% interest in the Olympic Pipeline Company also contributed to
the increase.


                                       -6-
<PAGE>



NET INCOME

Consolidated  net income of $80 million in 1996 decreased $14 million from 1995.
Transportation's  net income of $68 million  increased 8% over 1995,  reflecting
the higher  revenues and the impact of CGTX  partially  offset by higher  repair
costs and other operating and ownership  expenses.  Operating  margins  improved
slightly as growth in revenues  exceeded  the increase in fleet repair costs and
SG&A expenses.

Terminals' net income of $13 million declined from last year's $31 million.  The
difficult petroleum  terminaling markets resulted in decreased operating margins
at a number  of key  locations,  including  New  York  Harbor,  United  Kingdom,
Houston, Los Angeles, and Singapore.  Although Terminals has been able to reduce
its overall cost base, results have been impacted by  rationalization  costs and
consulting  charges.  Overall  operating  costs  decreased $5 million or 3% from
1995.  Fixed asset ownership  costs,  which include  depreciation  and interest,
increased  to 34% of revenue  from 29% in 1995 due to  significant  facility and
infrastructure   investments.   Terminals'  transformation  initiatives  led  to
increased  expense for  consulting  studies  and  rationalization  costs;  these
initiatives  continue  to  address  on-going  cost  reduction  and  productivity
enhancements.

Going into 1997,  Terminals  continues  to face a  difficult  petroleum  storage
market and is continuing its rationalization  process, as well as its evaluation
of both its markets and facilities.

Consolidated  net income of $94 million in 1995  increased $7 million from 1994.
Transportation's  1995 net income  increased $8 million over 1994 reflecting the
higher  revenues,  the increase in income  generated  from invested funds due to
higher interest rates, and higher equity earnings from Transportation's Canadian
affiliate.  Operating  margins  improved  slightly  as the  growth  in  revenues
exceeded the increase in fleet repair costs and SG&A expense.  Ownership  costs,
consisting of rental expense,  depreciation  and interest,  increased 21% due to
the  increased  fleet  size,  investments  in  GATC  service  centers,  and  new
operations in Mexico.

Terminals'  1995 net income  decreased  $1 million from 1994.  Higher  revenues,
slightly  improved   operating  margins  and  increased  earnings  from  foreign
affiliates were offset by higher SG&A and interest expenses. Terminals' business
environment  at the end of 1995 was  characterized  by continuing low distillate
storage demand,  historically low petroleum  industry  inventory  levels,  lower
pricing due to increased competition and low refinery margins.

ASSETS

Total assets at year end of $3.1  billion were $431 million  higher than in 1995
primarily  due to the  significant  level of  capital  additions  as well as the
consolidation   of  CGTX.   Offsetting   these   additions  were   depreciation,
sale-leasebacks  of railcars,  and asset sales and  retirements.  Transportation
utilizes railcars which are obtained through off-balance-sheet  operating leases
and, therefore, are not included on the balance sheet.

Net  operating  lease  assets  and  facilities  increased  $401  million to $2.3
billion.  Transportation's  capital  additions for 1996,  highlighted by the $84
million  acquisition of the remaining  interest in CGTX,  also included  roughly
$300  million  primarily  for  expanding  the railcar  fleet;  offsetting  these
additions  were  $150  million  of  railcar  sale-leasebacks.   Transportation's
additions  totaled  $365 million in 1995 when 6,200 new and used cars were added
to the U.S. fleet versus the 4,300 U.S. cars added in 1996.  Terminals'  capital
additions  of $130  million  in  1996,  13%  lower  than in 1995,  included  the
completion of the expansion of the Central Florida  Pipeline and the acquisition
of a majority interest in a Mexican terminal.

Investments in affiliated companies decreased $32 million. The primary change in
1996 was the consolidation of CGTX's assets, which removed $39 million from this
account.


                                       -7-

<PAGE>



LIABILITIES AND EQUITY

Total debt increased $272 million to fund a portion of the significant volume of
capital  additions  made during the year as well as debt  assumed  from the CGTX
acquisition.

Consolidated  equity increased $34 million  attributable to 1996 earnings of $80
million  partially reduced by dividends paid to GATX Corporation of $42 million.
The  balance  of the change is  attributable  to  foreign  currency  translation
adjustments.

LIQUIDITY AND CAPITAL RESOURCES

GATC generates significant cash flows from its operating activities. Most of its
capital  requirements  represent  additions to the railcar  fleet,  terminal and
pipeline  facilities,  and  joint  ventures,  and are  considered  discretionary
capital  expenditures.  The  level  of  discretionary  capital  spending  can be
adjusted as conditions in the economy or GATC's businesses warrant. However, the
non-  discretionary   level  of  Terminals'  capital  program  continues  to  be
significant due to regulatory and environmental  requirements of the terminaling
business.

Cash  provided by operating  activities  in 1996 of $231 million  increased  $20
million,  or 9%,  compared  to 1995.  Net income  adjusted  for  non-cash  items
(depreciation  and  deferred  taxes)  generated  $237  million of cash,  a small
increase from last year. Other cash from operations resulted in $16 million more
cash flow primarily due to changes in working capital.

Cash  provided by operating  activities  in 1995 of $211 million  increased  $10
million  compared to 1994. Net income adjusted for non-cash items generated $233
million of cash, up $24 million from 1994.  Other cash from operations  resulted
in $14 million  less cash flow than in 1994  primarily as a result of a decrease
in working capital.

Net cash used in investing  activities for 1996 increased $61 million from 1995.
While capital additions decreased $25 million, proceeds from asset dispositions,
which includes sale-leaseback proceeds,  declined $86 million.  Transportation's
capital  additions for 1996,  highlighted by the $84 million  acquisition of the
remaining  interest in CGTX,  also included  roughly $300 million  primarily for
expanding  the  railcar   fleet.   Offsetting   these   additions  were  railcar
sale-leasebacks.  Sale- leaseback proceeds were $150 million in 1996 compared to
$250 million in 1995.  Transportation's  additions  totaled $365 million in 1995
when 6,200 new and used cars were added to the U.S.  fleet versus the 4,300 U.S.
cars added in 1996.  Terminals'  capital  additions of $130 million in 1996, 13%
lower than in 1995,  included  the  completion  of the  expansion of the Central
Florida  Pipeline  and the  acquisition  of a  majority  interest  in a  Mexican
terminal.

Net cash used in investing  activities in 1995  decreased $32 million from 1994.
Capital   additions   of  $541  million   increased   $101  million  from  1994.
Transportation  invested $365 million in its domestic railcar fleet; $28 million
also was  invested  in  international  operations  in Mexico and Europe in 1995.
During  1995,  Transportation  completed  a major  upgrade  program for its four
strategically  located domestic service centers.  Terminals' capital spending of
$149 million was $6 million  lower than in 1994.  Spending in 1995  included the
expansion or upgrading of several existing  terminal  facilities,  including the
expansion of an existing pipeline in Central Florida,  and the acquisition of an
interest in a pipeline in the  Northwest.  Proceeds from asset  dispositions  of
$271  million in 1995,  including  $250  million of  sale-leasebacks  of certain
railcars at Transportation, increased $133 million from 1994.



                                       -8-
<PAGE>



Net cash  provided by financing  activities  was $108 million in 1996 versus $58
million in 1995. GATC finances its capital additions through cash generated from
operating activities, debt financings, and sale-leasebacks.  The increase in net
cash provided by financing activities is primarily due to a higher proportion of
debt versus sale-leaseback financing.

Cash provided by financing  activities  was $58 million in 1995 compared to $104
million in 1994.  During the year $200 million of long-term  debt was issued and
$92 million of long-term obligations were repaid.

GATC has a $300 million  revolving credit  facility.  GATC also has a commercial
paper  program  and  uncommitted  money  market  lines  which  are  used to fund
operating  needs.  In 1996,  GATC  amended  its  credit  facility  to extend the
maturity to 2001.  Under the  covenants  of the  commercial  paper  programs and
rating agency guidelines, GATC must keep unused revolver capacity at least equal
to the amount of commercial  paper  outstanding.  At December 31, 1996, GATC had
$10 million of commercial paper outstanding, resulting in unused committed lines
of credit of $290  million.  Also,  GATC had $96  million  of  borrowings  under
unsecured money market lines at December 31, 1996. CGTX had bankers' acceptances
and other  uncommitted  short-term  borrowings of $21 million Canadian  dollars.
GTL,  GATX  Terminals'  U.K.  subsidiary,  has a revolving  credit  agreement of
(pound)28 million, of which (pound)2 million was available at year end.

GATC has a $650 million shelf  registration for pass-through  trust certificates
and debt  securities  of which $207  million had been issued  through the end of
1996. At year end, GATC had $121 million of commitments to acquire  assets,  all
of which are scheduled to fund in 1997.

Environmental Matters

Certain  operations  of GATC and its  subsidiaries  (collectively  GATC) present
potential  environmental risks principally through the transportation or storage
of  various  commodities.  Recognizing  that  some  risk to the  environment  is
intrinsic to its operations, GATC is committed to protecting the environment, as
well as complying with applicable environmental protection laws and regulations.
GATC,  as well as its  competitors,  is subject to  extensive  regulation  under
federal,  state and local environmental laws which have the effect of increasing
the costs and  liabilities  associated  with the conduct of its  operations.  In
addition,  GATC's foreign operations are subject to environmental regulations in
effect in each respective jurisdiction.

GATC's  policy is to monitor and actively  address  environmental  concerns in a
responsible  manner.  GATC has  received  notices  from  the U.S.  Environmental
Protection  Agency (EPA) that it is a  potentially  responsible  party (PRP) for
study and  clean-up  costs at 11 sites  under the  requirements  of the  Federal
Comprehensive  Environmental  Response,  Compensation  and Liability Act of 1980
(Superfund).  Under Superfund and comparable state laws, GATC may be required to
share in the cost to clean-up various  contaminated  sites identified by the EPA
and  other  agencies.  In all  but one  instance,  GATC  is one of a  number  of
financially  responsible  PRPs and has been  identified as  contributing  only a
small  percentage  of the  contamination  at each of the  sites.  Due to various
factors such as the required level of remediation and  participation in clean-up
efforts  by  others,  GATC's  total  clean-up  costs at these  sites  cannot  be
predicted with  certainty;  however,  GATC's best estimates for  remediation and
restoration  of  these  sites  have  been  determined  and are  included  in its
environmental reserves.

Future costs of environmental compliance are indeterminable due to unknowns such
as the  magnitude  of  possible  contamination,  the  timing  and  extent of the
corrective  actions that may be required,  the  determination  of the  company's
liability in proportion to other  responsible  parties,  and the extent to which
such costs are recoverable from third parties including insurers. Also, GATC may
incur  additional  costs relating to facilities and sites where past  operations
followed  practices and procedures that were  considered  acceptable at the time
but in the future  may  require  investigation  and/or  remedial  work to ensure
adequate  protection to the environment  under current or future  standards.  If
future laws and regulations contain more stringent requirements than presently


                                       -9-



<PAGE>



anticipated,  expenditures  may be higher  than the  estimates,  forecasts,  and
assessments of potential  environmental  costs provided  below.  However,  these
costs are expected to be at least equal to the current level of expenditures. In
addition,  GATC has provided  indemnities for environmental issues to the buyers
of two divested companies for which GATC believes it has adequate reserves.

GATC's  environmental  reserve at the end of 1996 was $73 million  and  reflects
GATC's best  estimate of the cost to  remediate  its  environmental  conditions.
Additions  to the  reserve  were $12  million  in 1996 and $14  million in 1995.
Expenditures  charged to the reserve  amounted to $18 million and $16 million in
1996 and 1995, respectively.

In 1996,  GATC made capital  expenditures of $17 million for  environmental  and
regulatory  compliance  compared to $18 million in 1995. These projects included
marine vapor recovery,  discharge  prevention  compliance,  waste water systems,
impervious  dikes,  tank  modifications  for  emissions  control,  and  tank car
cleaning  systems.   Environmental   projects   authorized  or  currently  under
consideration would require capital expenditures of approximately $20 million in
1997. GATC anticipates it will make annual  expenditures at a similar level over
the next five years.

FORWARD-LOOKING STATEMENTS

Certain  statements  in the  Management's  Discussion  and  Analysis  constitute
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the
Company  believes  that  the  expectations  reflected  in  such  forward-looking
statements are based on reasonable  assumptions,  such statements are subject to
risks and  uncertainties  that could cause actual  results to differ  materially
from those projected.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------
The response to this item is submitted under Item 14 (a)(1) of this report.

Item 9. Changes in and  Disagreements  with  Accountants  on Accounting and
           Financial Disclosure
----------------------------------------------------------------------------
None.

PART III

Item 10.  Directors and Executive Officers of the Registrant
-------------------------------------------------------------
Not required.

Item 11.  Executive Compensation
---------------------------------
Not required.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
Not required.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------
Not required.


                                      -10-

<PAGE>



PART IV

Item 14.  Financial Statement Schedules, Reports on Form 8-K and Exhibits   Page
-------------------------------------------------------------------------   ----
(a) (1)  Financial Statements

         The consolidated financial statements of General American
          Transportation Corporation and its subsidiaries which are
          required in Item 8 are listed below:

          Statements of Consolidated Income and Reinvested Earnings--
           years ended December 31, 1996, 1995 and 1994..................... 17
          Consolidated Balance Sheets--December 31, 1996 and 1995........... 18
          Statements of Consolidated Cash Flows--
           years ended December 31, 1996, 1995 and 1994..................... 20
          Notes to Consolidated Financial Statements........................ 21

    (2)   Financial Statement Schedules

          Schedule II   Valuation and Qualifying Accounts................... 37

          All  other  schedules  for  which  provision  is  made  in the
          applicable   accounting   regulation  of  the  Securities  and
          Exchange   Commission  are  not  required  under  the  related
          instructions  or are  inapplicable  and  therefore  have  been
          omitted.

(b)       No reports on Form 8-K were filed during the reporting period.

(c)       Exhibit Index.


PART V

Exhibit
Number                     Exhibit Description                            Page
------                     -------------------                            ----
3A.    Certificate  of Incorporation of General American
       Transportation  Corporation,  incorporated by reference to the
       GATC  Annual  Report on Form 10-K for the  fiscal  year  ended
       December 31, 1991, file number 2-54754.

3B.    By-Laws of General  American  Transportation  Corporation,  as
       amended and  restated  as of June 15,  1994,  incorporated  by
       reference  to the  GATC  Annual  Report  on Form  10-K for the
       fiscal year ended December 31, 1994, file number 2-54754.


                                      -11-

<PAGE>


Exhibit
Number                        Exhibit Description                          Page
------                        -------------------                          ----
4A.     Indenture dated October 1, 1987, incorporated by reference to
        Exhibit 4.1 to the GATC Registration Statement on Form S-3 filed
        October 8, 1987, file number 33-17692; Indenture Supplement dated
        May 15, 1988, incorporated by reference to the GATC Quarterly
        Report on Form 10-Q for the quarter ended June 30, 1988, file
        number 2-54754.  Second Supplemental Indenture dated as of
        March 15, 1990, incorporated by reference to GATC Quarterly
        Report on Form 10-Q for the quarter ended March 30, 1990, file
        number 2-54754.  Third Supplemental Indenture dated as of
        June 15, 1990, incorporated by reference to GATC Quarterly Report
        on Form 10-Q for the quarter ended June 30, 1990, file
        number 2-54754. Fourth Supplemental Indenture dated as of
        January 15, 1996 filed with the SEC on Current Report on Form 8-K
        on January 26, 1996, file number 2-54754.

4B.     General American Transportation  Corporation Notices 1 through
        6 dated from  November 6, 1987 through April 12, 1988 defining
        the  rights of holders of GATC's  Medium-Term  Notes  Series A
        issued  during that period,  incorporated  by reference to the
        GATC Quarterly  Report on Form 10-Q for the quarter ended June
        30, 1988, file number 2-54754.

4C.     General American Transportation Corporation Notices 1 through 3
        dated from October 17, 1988 through October 24, 1988 and 4
        through 6 dated from November 7, 1988 through March 3, 1989
        defining the rights of holders of GATC's Medium-Term Notes Series B
        issued during those periods, Notices 1 through 3 incorporated by
        reference to the GATC Quarterly Report on Form 10-Q for the quarter
        ended September 30, 1988, and Notices 4 through 6 incorporated by
        reference to the GATC Annual Report on Form 10-K for the fiscal year
        ended December 31, 1988, file number 2-54754.

4D.     General American Transportation Corporation Notices 1 and 2
        dated from March 30, 1989 through March 31, 1989, Notices 3
        through 8 dated from April 4, 1989 through June 29, 1989, Notices
        9 through 16 dated from July 19, 1989 through September 29,
        1989, and Notices 17 through 21 dated from October 2, 1989
        through October 9, 1989 defining the rights of the holders of
        GATC's Medium-Term Notes Series C issued during those periods.
        Notices 1 and 2, Notices 3 through 8 and Notices 9 through 16 are
        incorporated by reference to the GATC Quarterly Reports on Form
        10-Q for the quarters ended March 31, 1989, June 30, 1989 and
        September 30, 1989, respectively, and Notices 17 through 21
        incorporated by reference to the GATC Annual Report on Form 10-K
        for the fiscal year ended December 31, 1989, file number 2-54754.



                                      -12-


<PAGE>



Exhibit
Number                      Exhibit Description                            Page
------                      -------------------                            ----
4E.     General American Transportation Corporation Notices 1 and 2 
        dated February 27, 1992,  Notices 3 through 5 dated from 
        December 7, 1992 through December 14, 1992 and notices 6 through
        10 dated from May 18, 1993 through May 25, 1993 defining the 
        rights of the holders of GATC's Medium-Term Notes Series D issued
        during those periods.  Notices 1 and 2 are incorporated by 
        reference to the GATC Quarterly Report on Form 10-Q for the 
        quarter ended March 31, 1992, Notices 3 through 5 are 
        incorporated by reference to the GATC Annual Report on 
        Form 10-K for the fiscal year ended December 31, 1992, and
        Notices 6 through 10 are incorporated by reference to the GATC
        Quarterly Report on Form 10-Q for the quarter ending June 30, 
        1993, file number 2-54754.

4F.     General American Transportation Corporation Notices 1 and 2
        dated June 8, 1994 and Notices 3 through 6 dated June 17, 1994,
        and Notices 7 through 11 dated July 18, 1994, defining the rights
        of the holders of GATC's Medium-Term Notes Series E issued during
        those periods.  Notices 1 through 6 are incorporated by reference 
        to the GATC Quarterly Report on Form 10-Q for the quarter ended 
        June 30, 1994, and Notices 7 through 11 are incorporated herein by
        reference to the Form 424(b)(5) dated July 18, 1994, file 
        number 2-54754.

4G.     General American Transportation Corporation Notices 12 through 14
        dated February 24, 1995, Notices 15 through 20 dated May 11, 1995,
        amended May 24, 1995, and Notices 21 through 30 dated from
        November 8, 1995 through November 13, 1995 defining the rights of
        the holders of GATC's Medium-Term Notes Series E issued during 
        those periods.  Notices 12 through 14 are incorporated by 
        reference to the Form 424(b)(5) dated February 24, 1995, Notices
        15 through 20 are incorporated by reference to the Form 424(b)(5)
        dated May 11, 1995, and Notices 21 through 30 are incorporated 
        by reference to the Form 424(b)(5) dated from November 8, 1995 
        through November 13, 1995, file number 2-54754.

4H.     Form of 8-5/8% Note due December 1, 2004 filed with the SEC on
        Current  Report on Form 8-K on December  7, 1994,  file number
        2-54754.

4I.     Form of 6-3/4%  Note due March 1, 2006  filed  with the SEC on
        Current  Report  on Form  8-K on March 4,  1996,  file  number
        2-54754.

10A.    Revolving Credit Facility Agreement for GATC as borrower dated
        as of  May  9,  1996,  incorporated  by  reference  to  GATC's
        Quarterly  Report on Form 10-Q for the  period  ended June 30,
        1996, file number 2-54754.

10B.    Supplemental  Revolving Credit Facility Agreement between GATX
        Terminals  Limited,  as borrower and GATC, as  guarantor,  and
        others,  dated July 24,  1996,  incorporated  by  reference to
        GATC's  Quarterly  Report  on Form 10-Q for the  period  ended
        September 30, 1996, file number 2-54754.



                                      -13-

<PAGE>


Exhibit
Number                      Exhibit Description                            Page
------                      -------------------                            ----
12.     Statement regarding computation of ratios of earnings to fixed       38
        charges.

23.     Consent of Independent Auditors                                      39

27.     Financial Data Schedule for GATC for the fiscal year
        ended December 31, 1996, file number 2-54754.  Submitted
        to the SEC along with the electronic submission of this
        report on Form 10-K.

        Any  instrument  defining the rights of security  holders with
        respect to nonregistered long-term debt not being filed on the
        basis that the amount of securities authorized does not exceed
        10 percent of the total assets of the company and subsidiaries
        on a  consolidated  basis will be furnished to the  Commission
        upon request.




                                      -14-


<PAGE>

                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) 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.


                                   GENERAL AMERICAN TRANSPORTATION CORPORATION
                                                (Registrant)



                                            /s/D. Ward Fuller
                                         -------------------------
                                              D. Ward Fuller
                                      President, Chief Executive Officer
                                               and Director
                                              March 19, 1997


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated.



       /s/D. Ward Fuller                              /s/David M. Edwards
-------------------------------                  -----------------------------
        D. Ward Fuller                                  David M. Edwards
President, Chief Executive Officer                          Director
         and Director                                    March 19, 1997
        March 19, 1997


     /s/Donald J. Schaffer                           /s/David B. Anderson
--------------------------------                -----------------------------
       Donald J. Schaffer                             David B. Anderson
Vice President, Finance and Chief                          Director
       Financial Officer                                March 19, 1997
         March 19, 1997





                                     -15-


<PAGE>


REPORT OF INDEPENDENT AUDITORS



Board of Directors
General American Transportation Corporation




We have audited the  consolidated  financial  statements and related schedule of
General American  Transportation  Corporation (a wholly-owned subsidiary of GATX
Corporation)  and  subsidiaries  listed in Item  14(a)(1)  and (2) of the Annual
Report on Form 10-K of General American Transportation  Corporation for the year
ended December 31, 1996. These financial statements and related schedule are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and related schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements and related schedule. An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of General American
Transportation  Corporation and  subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended  December 31, 1996, in conformity  with  generally  accepted
accounting principles.  Also, it is our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole,  presents  fairly in all material  respects,  the information set forth
therein.



                                                       ERNST & YOUNG LLP


Chicago, Illinois
January 28, 1997







                                      -16-


<PAGE>

<TABLE>
<CAPTION>

          GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

            STATEMENTS OF CONSOLIDATED INCOME AND REINVESTED EARNINGS
                                  (In Millions)



                                                         Year Ended December 31
                                                        1996      1995       1994
                                                       ------   ------     ------
<S>                                                  <C>       <C>       <C>     
Gross income .....................................   $  762.9  $  709.2  $  642.6

Costs and expenses
     Operating expenses ..........................      335.9     312.2     293.0
     Interest ....................................      118.2      99.4      78.3
     Provision for depreciation and amortization .      138.7     121.4     111.8
     Selling, general and administrative .........       63.3      55.2      46.7
                                                       ------    ------    ------
                                                        656.1     588.2     529.8
                                                       ------    ------    ------
Income before income taxes and equity in net
     earnings of affiliated companies ............      106.8     121.0     112.8

Income taxes .....................................       41.3      47.2      42.7
                                                       ------    ------    ------

Income before equity in net earnings of
     affiliated companies ........................       65.5      73.8      70.1

Equity in net earnings
     of affiliated companies .....................       14.8      20.1      16.9
                                                       ------    ------    ------

Net income .......................................       80.3      93.9      87.0

Reinvested earnings at beginning of year .........      392.7     346.9     306.5

Dividends paid to GATX Corporation ...............      (41.6)    (48.1)    (46.6)
                                                       ------    ------    ------

Reinvested earnings at end of year ...............   $  431.4  $  392.7  $  346.9
                                                       ======    ======    ======

<FN>

See notes to consolidated financial statements.
</FN>
</TABLE>




                                      -17-

<PAGE>

<TABLE>
<CAPTION>

          GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES


                           CONSOLIDATED BALANCE SHEETS
                                  (In Millions)


                                                               December 31
                                                         ----------------------
                                                         1996              1995
                                                         ----              ----
ASSETS


<S>                                                 <C>              <C>       
Cash and cash equivalents                           $     20.7       $     13.4


Trade receivables--net                                    83.7             64.8


Operating Lease Assets and Facilities:
    Railcars and support facilities                    2,436.5          1,945.1
     Tank storage terminals and pipelines              1,377.8          1,242.3
                                                      ---------        ---------
                                                       3,814.3          3,187.4

     Less - Allowance for depreciation                (1,558.7)        (1,332.3)
                                                      ---------        ---------
                                                       2,255.6          1,855.1


Due from GATX Corporation                                408.3            373.9


Investments in affiliated companies                      189.2            221.2

Other assets                                             104.8            102.6








TOTAL ASSETS                                          $3,062.3         $2,631.0
                                                      ========         ========



<FN>

See notes to consolidated financial statements.

</FN>
</TABLE>



                                      -18-

<PAGE>



<TABLE>
<CAPTION>




                                                           December 31
                                                    --------------------------
                                                    1996                  1995
                                                    --------           -------

LIABILITIES, DEFERRED ITEMS
     AND SHAREHOLDER'S EQUITY

<S>                                                <C>              <C>       
Accounts payable                                   $   128.8        $     89.9

Accrued expenses                                        40.8              36.4

Debt
     Short-term debt                                   166.9             144.8
     Long-term debt                                  1,230.0             972.9
     Capital lease obligations                         108.1             115.1
                                                  ----------        ----------
                                                     1,505.0           1,232.8

Deferred income taxes                                  352.1             281.1

Other deferred items                                   261.3             250.0
                                                  ----------        ----------

     Total liabilities and deferred items            2,288.0           1,890.2



Shareholder's equity
     Common Stock--par value $1 per share,
         1,000 shares authorized, issued and
         outstanding (owned by GATX Corporation)           -                 -
     Additional capital                                335.0             335.0
     Reinvested earnings                               431.4             392.7
     Cumulative foreign currency translation 
         adjustment                                      7.9              13.1
                                                   ----------         ---------

     Total shareholder's equity                        774.3             740.8
                                                   ----------        ----------


TOTAL LIABILITIES, DEFERRED ITEMS
     AND SHAREHOLDER'S EQUITY                       $3,062.3          $2,631.0
                                                    ========          ========

</TABLE>


                                      -19-

<PAGE>

<TABLE>

<CAPTION>



          GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                                  (In Millions)

                                                            Year Ended December 31
                                                           ------------------------
                                                           1996      1995      1994
                                                          ------    ------    ------

<S>                                                      <C>       <C>       <C>     
OPERATING ACTIVITIES 
  Net income ........................................   $   80.3  $   93.9  $   87.0
   Adjustments to reconcile net income to net
        cash provided by operating activities:
               Provision for depreciation
                 and amortization ....................     138.7     121.4     111.8
               Deferred income taxes .................      17.9      18.2      10.7
   Other (includes working capital) ..................      (6.2)    (22.3)     (8.7)
                                                           ------    ------    ------

   NET CASH PROVIDED BY OPERATING ACTIVITIES .........      230.7     211.2     200.8


INVESTING ACTIVITIES
   Additions to operating lease assets and facilities:
        Railcars and support facilities ..............     (299.6)   (382.0)   (281.8)
        Tank storage terminals and pipelines .........     (129.2)   (128.9)   (144.9)
   Investments in affiliated companies ...............       (4.4)    (30.3)    (13.1)
   Other investments .................................      (83.1)       --        --
                                                           ------    ------    ------
        Capital additions ............................     (516.3)   (541.2)   (439.8)
   Proceeds from asset dispositions ..................      184.7     270.7     137.3
                                                           ------    ------    ------

   NET CASH USED IN INVESTING ACTIVITIES .............     (331.6)   (270.5)   (302.5)


FINANCING ACTIVITIES
   Proceeds from issuance of long-term debt ..........      280.0     200.4     182.4
   Repayment of long-term debt .......................     (101.1)    (91.5)    (50.7)
   Net increase in short-term debt ...................       11.9      15.4      25.2
   Repayment of capital lease obligations ............       (6.6)     (6.5)     (4.9)
   Cash dividends paid to GATX Corporation ...........      (41.6)    (48.1)    (46.6)
   Net increase in amount due from GATX Corporation ..      (34.4)    (11.5)      (.9)
                                                           ------    ------    ------


NET CASH PROVIDED BY
   FINANCING ACTIVITIES ..............................      108.2      58.2     104.5



NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS ..............................   $    7.3  $   (1.1) $    2.8
                                                           =======    =======   ======

<FN>


See notes to consolidated financial statements.

</FN>
</TABLE>



                                      -20-
<PAGE>


GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies of General American  Transportation  Corporation
(GATC) and its consolidated subsidiaries are discussed below.

Consolidation:  The consolidated  financial  statements  include the accounts of
GATC and its majority-owned subsidiaries.  Investments in 20 to 50 percent-owned
companies  and joint  ventures are accounted for under the equity method and are
shown  as  investments  in  affiliated  companies.  Less  than 20  percent-owned
affiliated companies are recorded using the cost method.

Cash Equivalents:  GATC considers all highly liquid  investments with a maturity
of three  months or less when  purchased  to be cash  equivalents.  The carrying
amounts reported in the balance sheet for cash and cash equivalents  approximate
the fair value of those assets.

Operating Lease Assets and Facilities: Operating lease assets and facilities are
stated principally at cost. Assets acquired under capital leases are included in
operating  lease assets and facilities and the related  obligations are recorded
as liabilities. Provisions for depreciation include the amortization of the cost
of capital leases and are computed by the straight-line  method which results in
equal annual depreciation charges over the estimated useful lives of the assets.
The estimated useful lives of depreciable assets are as follows:

  Railcars                                                       20-33 years
  Buildings, leasehold improvements,
     storage tanks, and pipelines                                 5-40 years
  Machinery and related equipment                                 3-25 years

Goodwill:  GATC has  classified as goodwill the cost in excess of the fair value
of net assets acquired.  Goodwill,  which is included in other assets,  is being
amortized on a straight-line basis over 40 years. GATC continually evaluates the
existence  of  goodwill  impairment  on the basis of  whether  the  goodwill  is
recoverable from projected  undiscounted net cash flows of the related business.
Goodwill, net of accumulated  amortization of $3.4 million and $2.7 million, was
$41.9 million and $18.3 million as of December 31, 1996 and 1995,  respectively.
Amortization expense was $.8 million for 1996 and $.5 million for 1995 and 1994.

Income  Taxes:  United  States  income  taxes  have  not  been  provided  on the
undistributed earnings of foreign subsidiaries and affiliates which GATC intends
to permanently  reinvest in these foreign  operations.  The cumulative amount of
such earnings was $130.4 million at December 31, 1996.

Other   Deferred   Items:   Other   deferred   items  include  the  accrual  for
postretirement  benefits other than pensions;  environmental,  general liability
and workers' compensation reserves; and other deferred credits.



                                      -21-

<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE A--SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

Off-Balance-Sheet-Financial  Instruments:  GATC uses  interest rate and currency
swaps,  forwards and similar  contracts  to set  interest and exchange  rates on
existing  or  anticipated  transactions.  These  instruments  qualify  for hedge
accounting.  Fair  values  of  GATC's  off-balance-sheet  financial  instruments
(futures,  swaps,  forwards,  options  and  purchase  commitments)  are based on
current market prices, settlement values or fees currently charged to enter into
similar agreements. The fair values of the hedge contracts are not recognized in
the  financial  statements.  Net amounts paid or received on such  contracts are
recognized over the term of the contract as an adjustment to interest expense or
the basis of the hedged financial instrument.

Environmental  Liabilities:  Expenditures  that  relate  to  current  or  future
operations are expensed or capitalized as appropriate.  Expenditures that relate
to an existing condition caused by past operations,  and which do not contribute
to current or future revenue generation,  are charged to environmental reserves.
Reserves are recorded in accordance with accounting  guidelines to cover work at
identified  sites when  GATC's  liability  for  environmental  clean-up  is both
probable and a minimum estimate of associated costs can be made;  adjustments to
initial estimates are recorded as necessary.

Revenue  Recognition:  The  majority of GATC's gross income is derived from
the rentals of railcars and terminals and other services.

Foreign  Currency  Translation:  The assets and  liabilities of GATC  operations
located  outside the United States are translated at exchange rates in effect at
year end, and income statements are translated at the average exchange rates for
the year.  Gains or losses  resulting from the  translation of foreign  currency
financial  statements  are  deferred  and  recorded as a separate  component  of
consolidated  shareholder's  equity.  Incremental  unrealized  translation gains
(losses)  recorded in the cumulative  foreign  currency  translation  adjustment
account were $(5.2) million, $(8.4) million and $19.1 million during 1996, 1995,
and 1994, respectively.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted accounting principles necessarily requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial  statements as well as revenues and expenses  during the reporting
period.  Actual  amounts  when  ultimately  realized  could  differ  from  those
estimates.

Reclassifications:  Certain amounts in the 1995 and 1994 financial statements 
have been reclassified to conform to the 1996 presentation.

NOTE B--ACCOUNTING FOR LEASES

The following information pertains to GATC as a lessor:

Operating leases:  Railcar and tankage assets included in operating lease assets
and facilities are classified as operating leases.




                                      -22-

<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE B--ACCOUNTING FOR LEASES (CONT'D)

Minimum  future  receipts:  Minimum  future rental  receipts from  noncancelable
operating leases by year at December 31, 1996 were (in millions):

             1997                                          $   519.1
             1998                                              370.9
             1999                                              273.3
             2000                                              182.3
             2001                                              106.0
             Years thereafter                                  294.3
                                                            ----------

                                                            $1,745.9

The following information pertains to GATC as a lessee:

Capital  leases:  Certain  railcars  are  leased  by GATC  under  capital  lease
agreements.  Operating  lease assets and  facilities  includes  cost and related
allowances for  depreciation of $152.2 million and $82.7 million,  respectively,
at December  31, 1996 and $152.8  million and $76.5  million,  respectively,  at
December 31, 1995 for these  railcars.  The cost of these assets is amortized on
the straight-line basis with the charge included in depreciation expense.

Operating   leases:   GATC  has  financed   railcars   through   sale-leasebacks
substantially  all of which are accounted for as operating  leases. In addition,
GATC leases certain other assets and office facilities. Total rental expense for
the years ended  December  31, 1996,  1995,  and 1994 was $81.3  million,  $65.1
million, and $50.3 million, respectively.

Minimum  future  rental  payments:  Future  minimum  rental  payments  due under
noncancelable leases at December 31, 1996 were (in millions):

                                               Capital         Operating
                                               Leases           Leases

      1997                                   $   17.5      $      72.1
      1998                                       17.3             74.1
      1999                                       17.3             69.2
      2000                                       17.2             70.0
      2001                                       16.8             70.8
      Years thereafter                           81.5          1,205.4
                                            ---------       ----------
                                                167.6        $ 1,561.6
                                                            ==========

      Less - Amount representing interest       (59.5)
                                           ----------

      Present value of future
        minimum capital lease
        payments                              $ 108.1
                                              =======

The above  capital  lease  amounts do not include the cost of  licenses,  taxes,
insurance and maintenance which GATC is required to pay. Interest expense on the
above capital  lease  obligations  was $10.2  million in 1996,  $10.6 million in
1995, and $11.3 million in 1994.




                                      -23-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE C--ADVANCES TO/FROM PARENT

Interest  income on advances to GATX,  which is included in gross  income on the
income  statement,  was $37.4 million in 1996,  $34.9 million in 1995, and $17.4
million in 1994. Interest expense on advances from GATX to GATC was $9.1 million
in 1996, $6.2 million in 1995, and $1.8 million in 1994.  These advances have no
fixed maturity date. Interest income/expense on advances to/from GATX were based
on an interest rate which is adjusted annually in accordance with an estimate of
short-term  borrowing rates and averaged 5.55% in 1996, 7.45% in 1995, and 4.09%
in 1994.

NOTE D--INVESTMENTS IN AFFILIATED COMPANIES

GATC has  investments  in 20 to 50  percent-owned  companies and joint  ventures
which are  accounted  for using the equity  method.  These  domestic and foreign
investments   are  in  businesses   similar  to  those  of  GATC's   operations.
Distributions received from such jointly-owned companies were $5.2 million, $7.3
million, and $2.6 million in 1996, 1995, and 1994, respectively.

Summarized operating results for all affiliated companies in their entirety were
(in millions):

                                                      For the Year
                                              ----------------------------
                                              1996       1995         1994
                                              ------    ------       -----

              Revenues                        $205.9    $233.8       $206.8
              Net income                        30.7      44.0         35.7

Summarized  balance sheet data for all  affiliated  companies in their entirety
were (in millions):

                                                              December 31
                                                       -----------------------
                                                        1996             1995
                                                       ------            -----

              Total assets                             $870.3           $868.0
              Long-term liabilities                     442.6            347.6
              Other liabilities                         121.0            151.5
                                                       ------          -------

              Shareholder's equity                     $306.7           $368.9
                                                       ======           ======




                                      -24-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE E--FOREIGN OPERATIONS

GATC has a number of investments in subsidiaries and affiliated  companies which
are  located  in or derive  income  from  foreign  countries.  Foreign  entities
contribute  significantly to equity in net earnings of affiliated companies. The
foreign  identifiable  assets represent  investments in affiliated  companies as
well as fully consolidated  assets for a Canadian railcar  subsidiary,  a United
Kingdom terminaling operation, and a Mexican railcar operation.

Gross Income (in Millions)                    1996         1995         1994
--------------------------                  --------     --------     --------

Foreign                                   $    66.2    $    35.5    $    30.6
United States                                 696.7        673.7        612.0
                                          ---------    ---------     --------

                                          $   762.9    $   709.2     $  642.6
                                          =========    =========     ========

Income Before Income Taxes and
Equity in Net Earnings of Affiliated
Companies (in Millions)                     1996          1995           1994
-------------------------------------     --------      --------       -------

Foreign                                   $   (0.1)    $     .7      $    2.8
United States                                106.9        120.3         110.0
                                          --------     --------      --------

                                          $  106.8     $  121.0      $  112.8
                                          ========     ========      ========

Equity in Net Earnings of
Affiliated Companies (in Millions)          1996          1995          1994
----------------------------------        --------      --------       ------

Foreign                                   $   14.0     $   19.6      $   16.9
United States                                   .8           .5             -
                                          --------     --------      --------

                                          $   14.8     $   20.1      $   16.9
                                          ========     ========      ========


Identifiable Assets (in Millions)           1996         1995          1994
---------------------------------         --------     --------      --------

Foreign                                   $  644.5     $  318.2      $  273.1
United States                              2,417.8      2,312.8       2,193.5
                                          --------     --------      --------

                                          $3,062.3     $2,631.0      $2,466.6
                                          ========     ========      ========


Foreign  cash flows  generated  are used to meet local  operating  needs and for
reinvestment.  The translation of the foreign  balance sheets into U.S.  dollars
results  in  an  increase  or  decrease  to  the  unrealized   foreign  currency
translation  adjustment  within the  cumulative  unrealized  equity  adjustments
account.








                                      -25-


<PAGE>


GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE F--SHORT-TERM DEBT AND LINES OF CREDIT

Short-term debt and its weighted  average  interest rate as of year end were (in
millions):

                                                December 31
                               -------------------------------------------
                                      1996                     1995
                               -------------------      ------------------
                                Amount      Rate         Amount       Rate
                               -------      ----        -------       ----
Commercial paper               $  10.0      5.58%       $  44.6       6.02%
Other short-term borrowings      156.9      5.74          100.2       6.41
                               -------                  -------       

                                $166.9                   $144.8
                               =======                   ======

Under a revolving credit agreement with a group of banks,  GATC may borrow up to
$300.0 million.  The revolving  credit agreement  contains  various  restrictive
covenants which include, among other things, minimum net worth,  restrictions on
additional  indebtedness,  and requirements to maintain certain financial ratios
for GATC. Under the agreement GATC met its requirement to maintain a minimum net
worth of $590.1  million at December 31, 1996.  While at year end no  borrowings
were outstanding  under the agreement,  the available line of credit was reduced
by $10.0 million of commercial paper  outstanding.  GATC had borrowings of $96.4
million under  unsecured money market lines at December 31, 1996.  CGTX,  GATC's
Canadian  railcar  subsidiary,  had bankers'  acceptances and other  uncommitted
short-term  borrowings of $21.1 million  Canadian  dollars at December 31, 1996.
GTL,  GATX  Terminals'  U.K.  subsidiary,  has a revolving  credit  agreement of
(pound)28.0 million of which (pound)1.7 million was available at year end.

Interest  expense on short-term  debt was $11.9 million in 1996, $8.5 million in
1995, and $6.2 million in 1994.

NOTE G--LONG-TERM DEBT

Long-term debt consisted of (in millions):

                                 Interest     Final               December 31
                                  Rates      Maturity          1996        1995
                             --------------------------------------------------
Fixed Rate:
 Term notes                  5.75%-10.875%   1997-2011      $1,142.1     $885.0
 Industrial revenue bonds    6.625%-7.3%     2019-2024          87.9       87.9
                                                            --------     ------

                                                            $1,230.0     $972.9
                                                            ========     ======


                                      -26-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE G--LONG-TERM DEBT (CONT'D)

Maturities  of GATC's  long-term  debt as of  December  31, 1996 for each of the
years 1997 through 2001 were (in millions):

                          Year                  Amount

                          1997                $   66.0
                          1998                   111.2
                          1999                    93.8
                          2000                   108.3
                          2001                    95.8

Interest cost incurred on long-term debt, net of capitalized interest, was $87.0
million in 1996, $74.1 million in 1995, and $59.0 million in 1994. Interest cost
capitalized as part of the cost of acquisition or  construction  of major assets
was $3.7 million in 1996, $4.6 million in 1995, and $2.7 million in 1994.

NOTE H--OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

In the ordinary course of business,  GATC utilizes  off-balance  sheet financial
instruments to manage financial market risk, including interest rate and foreign
exchange risk.

At  December  31,  1996  GATC  had the  following  off-balance  sheet  financial
instruments (in millions):

                                   Notional     Pay          Receive
Interest Rate Swaps                 Amount   Rate/Index    Rate/Index  Maturity
---------------------               ------  -----------  ------------  --------
GATC pays fixed, receives floating  $881.0 5.097%-8.745%     LIBOR     1997-2001
GATC pays floating, receives fixed   912.0    LIBOR      6.205%-7.646% 2003-2006


Currency Swaps                      Receive    Deliver     Maturity

Canadian dollar swaps               $115.0    C$156.1       2011






                                      -27-



<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE H--OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (CONT'D)

GATC had the following interest rate hedge activity (in millions):

                                                      Pay                 Pay
Interest Rate Swaps                                  Fixed              Floating
--------------------                                ------              --------
Balance at January 1, 1995                          $500.0               $600.0

Additions                                            365.5                250.0
Maturities                                          (100.0)                   -
                                                    -------              -------

Balance at December 31, 1995                         765.5                850.0

Additions                                            315.5                 62.0
Maturities                                          (200.0)                   -
                                                   -------               -------

Balance at December 31, 1996                        $881.0               $912.0
                                                    ======               ======

GATC  manages  its  assets  and  liabilities  using  interest  rate swaps and on
occasion uses interest rate forwards for anticipated transactions. Interest rate
swaps are utilized to better match the duration of GATC's debt  portfolio to the
duration of its railcar leases. Railcar assets are financed with long-term fixed
rate debt or through sale-leasebacks.  However, the railcar assets are placed on
lease with  average new lease terms of 5 years;  the average  renewal  term is 3
years.  Rents are fixed over these lease terms.  Interest rate swaps effectively
convert GATC's long-term fixed rate debt to fixed rate debt with maturities of 3
months to 3 years. Through the swap program, railcar lease rates are expected to
better reflect GATC's  interest costs.  At GATX Terminals  Limited,  an interest
rate swap is used to fix the  interest  rate on a portion of its  floating  rate
debt.

In its swaps,  GATC  agrees to exchange at  specific  intervals  the  difference
between fixed and floating rate  interest  amounts  calculated on an agreed upon
notional  principal amount.  The swaps have in effect converted $31.0 million of
long-term  fixed  rate  debt  into  floating  rate debt and  $881.0  million  of
long-term fixed rate debt into 1-3 year fixed rate debt.

The net amount payable or receivable  from the interest rate swap  agreements is
accrued as an  adjustment  to interest  expense.  The fair value of its interest
rate swap  agreements  is an estimate of the amount the company would receive or
pay to terminate the swap agreement;  at December 31, 1996, GATC would have paid
$10.4  million if the swaps were  terminated.  At December 31, 1995,  GATC would
have received $27.1 million if the swaps were terminated.

GATC has entered into currency swaps to hedge $115.0 million in debt obligations
at its Canadian subsidiary.

In the event that a  counterparty  fails to meet the terms of the interest  rate
swap agreement or a foreign exchange contract, GATC's exposure is limited to the
interest  rate  or  currency  differential.  GATC  manages  the  credit  risk of
counterparties  by dealing  only with  institutions  that the company  considers
financially  sound  and  by  avoiding  concentrations  of  risk  with  a  single
counterparty. GATC considers the risk of nonperformance to be remote.



                                      -28-

<PAGE>


NOTE I--FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, defines the
fair value of a financial instrument as the amount at which the instrument could
be exchanged in a current  transaction  between willing  parties.  The following
table  presents  the  carrying  amounts  and  estimated  fair  values  of GATC's
financial  instruments  that were  recorded on the balance sheet at year end (in
millions):

                                                  December 31
                                   -----------------------------------------
                                            1996                   1995
                                   --------------------   ------------------
                                   Carrying      Fair     Carrying      Fair
                                    Amount       Value     Amount      Value
                                   --------     ------    --------   --------
Assets:
 Cash and cash equivalents         $  20.7     $  20.7    $  13.4    $  13.4
 Trade receivables-net                83.7        83.7       64.8       64.8
 Due from GATX Corporation           408.3       408.3      373.9      373.9

Liabilities:
 Accounts payable                    128.8       128.8       89.9       89.9
 Short-term debt                     166.9       166.9      144.8      144.8
 Long-term debt - fixed            1,230.0     1,300.4      972.9    1,085.2

The carrying  amounts shown in the table are included in the balance sheet under
the indicated captions.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

Cash and cash equivalents,  trade receivables,  accounts payables and short-term
debt are  carried at cost  which  approximates  fair value  because of the short
maturity of those instruments.

The  carrying  amounts  reported  in the  balance  sheet  for the Due from  GATX
Corporation approximate fair value.

The fair  value of fixed rate  long-term  debt was  estimated  by  performing  a
discounted  cash flow  calculation  using the note term and market interest rate
based on  GATC's  current  incremental  borrowing  rates for  similar  borrowing
arrangements.

NOTE J--PENSION BENEFITS

GATC and its subsidiaries contributed to several pension plans sponsored by GATX
which cover  substantially all employees.  Benefits under the plans are based on
years of service and/or final average  salary.  The funding policy for all plans
is based on an  actuarially  determined  cost method  allowable  under  Internal
Revenue Service  regulations.  Contributions to these plans were $5.0 million in
1996, $3.5 million in 1995, and $6.6 million in 1994.




                                      -29-


<PAGE>


GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE J-- PENSION BENEFITS (CONT'D)

Costs pertaining to the GATX plans are allocated to GATC on the basis of payroll
costs with respect to normal cost and on the basis of  actuarial  determinations
for prior service cost. Net periodic  pension cost for 1996,  1995, and 1994 was
$3.0  million,  $3.1  million,  and $2.6  million,  respectively.  Plan  benefit
obligations, plan assets, and the components of net periodic cost for individual
subsidiaries of GATX have not been determined.

NOTE K--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

GATC provides health care, life insurance and other benefits for certain retired
employees who meet established  criteria.  Most domestic  employees are eligible
for  health  care and life  insurance  benefits  if they  retire  from GATC with
immediate  pension  benefits  under the GATX pension plan.  The plans are either
contributory or non-contributory, depending on various factors.

Net  periodic   postretirement  cost  includes  the  following   components  (in
millions):

                                              1996     1995     1994
                                              ----     ----     ----

  Current service cost                       $  .4    $  .4    $  .4
  Interest cost on accumulated
   postretirement benefit obligation           4.1      4.2      4.7
                                            -------  -------   ------

  Net periodic postretirement benefit cost  $  4.5    $ 4.6    $ 5.1
                                            =======  =======   ======

  Discount rate                              7.75%    7.75%     7.75%
                                            =======  =======   ======



                                      -30-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE K--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONT'D)
<TABLE>
<CAPTION>

The following  table sets forth the amounts  recognized  in GATC's  consolidated
balance sheet (in millions):
                                                              December 31
                                                        1996              1995
                                                       -----              ----

<S>                                                    <C>               <C>  
Accumulated postretirement benefit obligation
  Retirees                                             $47.0             $48.2
  Fully eligible active plan participants                2.4               2.5
  Other active plan participants                         5.2               4.8
                                                      ------             ------

 Total accumulated postretirement benefit obligation    54.6              55.5

 Unrecognized gain                                      10.1               9.1
                                                       -----             ------

 Accrued postretirement benefit liability              $64.7             $64.6
                                                       =====             =====
</TABLE>


The accrued  postretirement  benefit  liability was determined  using an assumed
discount rate of 7.75% for 1996 and 1995.

For  measurement  purposes,  blended rates ranging from 7% decreasing to 5% over
the next year and remaining at that level  thereafter were used for the increase
in the per capita  cost of covered  health care  benefits.  The health care cost
trend rate  assumption has a significant  effect on the amount of the obligation
and periodic cost  reported.  An increase in the assumed  health care cost trend
rates by 1% would increase the accumulated  postretirement benefit obligation by
$3.9 million and would increase  aggregate  service and interest cost components
of net periodic postretirement benefit cost by $.3 million per year.


NOTE L--INCOME TAXES

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes.





                                   -31-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE L--INCOME TAXES (CONT'D)

Significant  components of GATC's  deferred tax  liabilities and assets were (in
millions):

                                                                December 31
                                                           1996           1995
                                                           ----           ----
Deferred tax liabilities:
 Book/tax basis differences due to depreciation           $392.9         $329.4
 Other                                                      45.8           30.1
                                                          ------        -------
        Total deferred tax liabilities                     438.7          359.5

Deferred tax assets:
 Accruals not currently deductible for tax purposes         35.9           34.4
 Postretirement benefits other than pensions                22.7           22.8
 Lease accounting                                           21.8           19.4
 Other                                                       6.2            1.8
                                                        --------       --------
        Total deferred tax assets                           86.6           78.4
                                                        --------       --------

Net deferred tax liabilities                              $352.1         $281.1
                                                        ========        ========

The  results  of  operations  of GATC and its  United  States  subsidiaries  are
included  in the  consolidated  federal  income  tax  return  of  GATX.  Current
provisions for federal income taxes represent  amounts payable to GATX resulting
from  inclusion of GATC's  operations  in the  consolidated  federal  income tax
return.  Amounts shown as currently  payable for federal income taxes  represent
taxes payable due to the alternative minimum tax.

Income taxes consisted of (in millions)

                                                For the Year
                                      -----------------------------
                                       1996       1995        1994
                                      ------     ------       -----
  Current-
    Domestic:
      Federal                         $ 19.4      $ 26.7      $ 30.1
      State and local                    1.8         2.2         1.7
                                     -------    --------    --------
                                        21.2        28.9        31.8
    Foreign                              2.2          .1          .2
                                     -------    --------    --------
                                        23.4        29.0        32.0
   Deferred-
     Domestic:
       Federal                          16.9        16.7         8.4
       State and local                   1.5         1.0         1.5
                                     -------    --------    --------
                                        18.4        17.7         9.9
    Foreign                              (.5)         .5          .8
                                     -------    --------    --------
                                        17.9        18.2        10.7
                                     -------    --------    --------

   Income tax expense                 $ 41.3      $ 47.2      $ 42.7
                                     =======    ========    ========

   Income taxes paid                  $ 23.9      $ 26.9      $ 31.9
                                     =======    ========    ========



                                      -32-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE L--INCOME TAXES (CONT'D)

The reasons for the  differences  between the effective  income tax rate and the
federal statutory income tax rate were:

                                                        For the Year
                                               ------------------------------
                                               1996         1995         1994
                                               ----         ----         ----
Federal statutory income tax rate              35.0%        35.0%        35.0%
Add (deduct) effect of:
   Foreign income                               2.2          1.0           .7
   State income taxes                           2.0          1.7          1.9
   Minority interest                              -          2.0           .9
   Purchase accounting adjustments                -            -           .3
   Other                                        (.6)         (.7)        (1.0)
                                              ------       ------        -----

                                               38.6%        39.0%        37.8%
                                              ======       ======        =====



NOTE M--COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS OF CREDIT RISK

GATC's  revenues  are derived  from a wide range of  industries  and  companies.
However, approximately 80% of total consolidated revenues are generated from the
transportation or storage of products for the chemical and petroleum industries.

Under its customer lease  agreements,  GATC retains legal ownership of the asset
except when such assets have been  financed by  sale-leasebacks.  GATC  performs
credit  evaluations  prior to approval of a lease  contract.  Subsequently,  the
creditworthiness  of  the  customer  is  monitored  on an  ongoing  basis.  GATC
maintains  an  allowance  for possible  losses to provide for  potential  losses
should customers become unable to discharge their obligations to GATC.

At  December  31,  1996 GATC had firm  commitments  to acquire  railcars  and to
upgrade facilities totaling $121 million.

GATC and its  subsidiaries are engaged in various matters of litigation and have
a number of unresolved claims pending,  including proceedings under governmental
laws and regulations related to environmental matters. While the amounts claimed
are substantial,  and the ultimate liability with respect to such litigation and
claims cannot be  determined at this time, it is the opinion of management  that
damages,  if  any,  required  to be paid by  GATC  and its  subsidiaries  in the
discharge of such liability are not likely to be material to GATC's consolidated
financial position or results of operations.




                                      -33-


<PAGE>



GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS

GATC is engaged in the following businesses:

Railcar  Leasing  and  Management  represents  General  American  Transportation
Corporation and its foreign subsidiaries and affiliates (Transportation),  which
lease and manage tank cars and other specialized railcars.

Terminals and Pipelines  represents GATX Terminals  Corporation and its domestic
and foreign subsidiaries and affiliates (Terminals),  which own and operate tank
storage terminals, pipelines and related facilities.

Intersegment   sales  are  not   significant  in  amount  or  meaningful  to  an
understanding of GATC's business segments.

The following  presentation of segment  profitability  includes the direct costs
incurred at the segment's operating level plus expenses allocated by GATX. These
allocated  expenses  represent  costs for services  provided by GATX which these
operations  would have incurred  otherwise and are  determined on a usage basis;
management  believes that this method is  reasonable.  Such costs do not include
general corporate expense nor interest on debt of GATX.

Interest  costs  associated  with  segment  indebtedness  are  included  in  the
determination  of  profitability of each segment since interest expense directly
influences any investment decision and the evaluation of subsequent  operational
performance.  Interest costs by segment have been shown separately so the reader
can ascertain segment profitability before deducting interest expense.








                                      -34-


<PAGE>

<TABLE>
<CAPTION>

GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)


                                                          (In millions)
                                                    ----------------------------
                                                       1996    1995     1994
                                                    ----------------------------

<S>                                                  <C>      <C>      <C>     
Gross Income:
     Railcar Leasing and Management                  $  427.9 $  360.9 $  322.1
     Terminals and Pipelines                            297.6    313.4    303.1
                                                       ------   ------   ------

              Subtotal                                  725.5    674.3    625.2

     Intersegment amounts with other GATX segments       37.4     34.9     17.4
                                                       ------   ------   ------

CONSOLIDATED                                         $  762.9 $  709.2 $  642.6
                                                       ======   ======   ======


Income Before Income Taxes and Equity
     in Net Earnings of Affiliated Companies:
     Railcar Leasing and Management                  $  103.8 $   90.7 $   79.6
     Terminals and Pipelines                              3.0     30.3     33.2
                                                       ------   ------   ------

CONSOLIDATED                                         $  106.8 $  121.0 $  112.8
                                                       ======   ======   ======


Equity in Net Earnings
     of Affiliated Companies:
         Railcar Leasing and Management              $    2.9 $    5.4 $    4.7
         Terminals and Pipelines                         11.9     14.7     12.2
                                                       ------   ------   ------

CONSOLIDATED                                         $   14.8 $   20.1 $   16.9
                                                       ======   ======   ======


Net Income:
         Railcar Leasing and Management              $   67.7 $   62.9 $   55.1
         Terminals and Pipelines                         12.6     31.0     31.9
                                                       ------   ------   ------

CONSOLIDATED                                         $   80.3 $   93.9 $   87.0
                                                       ======   ======   ======

</TABLE>


                                      -35-


<PAGE>

<TABLE>
<CAPTION>


GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)

NOTE N--FINANCIAL DATA OF BUSINESS SEGMENTS (CONT'D)



                                                        (In Millions)
                                               ---------------------------------
                                                   1996       1995        1994
                                               ---------------------------------

<S>                                            <C>         <C>         <C>       
Identifiable Assets:
    Railcar Leasing and Management             $  2,387.1  $  2,041.9  $  1,882.8
    Terminals and Pipelines                       1,193.5     1,101.5     1,022.5
    Other                                             1.0         1.0          .6
                                                 --------    --------    --------
                                                  3,581.6     3,144.4     2,905.9
    Intersegment amounts                           (519.3)     (513.4)     (439.3)
                                                 --------    --------    --------

CONSOLIDATED                                   $  3,062.3  $  2,631.0  $  2,466.6
                                                 ========    ========    ========

Capital Additions:
    Railcar Leasing and Management             $    386.8  $    392.6  $    285.4
    Terminals and Pipelines                         129.5       148.6       154.4
                                                 --------    --------    --------

CONSOLIDATED                                   $    516.3  $    541.2  $    439.8
                                                 ========    ========    ========

Provision for Depreciation and Amortization:
    Railcar Leasing and Management             $     86.8  $     76.1  $     68.3
    Terminals and Pipelines                          51.9        45.3        43.5
                                                 --------    --------    --------

CONSOLIDATED                                   $    138.7  $    121.4  $    111.8
                                                 ========    ========    ========

Interest Expense:
    Railcar Leasing and Management             $    108.5  $     92.2  $     70.0
    Terminals and Pipelines                          53.5        46.4        39.7
                                                 --------    --------    --------
                                                    162.0       138.6       109.7
    Intersegment amounts                            (43.8)      (39.2)      (31.4)
                                                 --------    --------    --------

CONSOLIDATED                                   $    118.2  $     99.4  $     78.3
                                                 ========    ========    ========


</TABLE>


                                      -36-


<PAGE>


<TABLE>
<CAPTION>

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

          GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES
                                  (In Millions)



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


          COL. A                      COL. B         COL. C      COL. D        COL. E          COL. F

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


                                          ADDITIONS
                                                                 Charged to
                                     Balance at     Charged to    Other                        Balance
                                      Beginning      Costs &     Accounts-      Deductions-    at End
                                      of Period      Expenses    Describe        Describe     of Period
-------------------------------------------------------------------------------------------------------------------

<S>                                  <C>           <C>        <C>              <C>              <C>   
Year ended December 31, 1996:
     Allowance for possible losses
         in collection of trade
         receivables - Note A        $  5.4        $  .3      $   1.7 (B)      $   1.9 (C)      $  5.5

Year ended December 31, 1995:
     Allowance for possible losses
         in collection of trade
         receivables - Note A        $  5.4       $  .1       $   1.2 (B)      $   1.3 (C)      $  5.4

Year ended December 31, 1994:
     Allowance for possible losses
         in collection of trade
         receivables - Note A        $  5.8       $  .1       $  --            $   .5 (C)       $  5.4

<FN>

Note A - Deducted from asset  accounts.  Note B - Transfer from other  accounts.
Note C - Uncollectible accounts charged off.
</FN>
</TABLE>



                                      -37-


<PAGE>

<TABLE>
<CAPTION>


                                                                     EXHIBIT 12

          GENERAL AMERICAN TRANSPORTATION CORPORATION AND SUBSIDIARIES

               COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
                         (In Millions Except For Ratios)



                                                        1996       1995      1994     1993      1992
                                                       ------     ------   ------   ------      -----

<S>                                                  <C>       <C>       <C>       <C>       <C>     
Earnings available for fixed charges:
     Net Income ..................................   $   80.3  $   93.9  $   87.0  $   74.1  $   66.1

Add (deduct):
     Income taxes ................................       41.3      47.2      42.7      45.1      31.7
     Cumulative effect of accounting changes .....         -         -         -         -        6.7
     Equity in net earnings of affiliated
          companies, net of distributions received       (9.6)    (12.8)    (14.2)    (11.5)    (13.2)
     Interest on indebtedness and amortization
          of debt discount and expense ...........      118.2      99.4      78.3      78.8      96.0
     Amortization of capitalized interest ........        1.1       1.1       1.1       1.1       1.1
     Portion of rents representative of interest
          factor (deemed to be one-third) ........       27.0      21.7      16.8      13.2       9.3
                                                       ------    ------    ------    ------    ------

     Total earnings available for fixed charges ..   $  258.3  $  250.5  $  211.7  $  200.8  $  197.7
                                                       ======    ======    ======    ======    ======

Fixed charges:
     Interest on indebtedness and amortization
          of debt discount and expense ...........   $  118.2  $   99.4  $   78.3  $   78.8  $   96.0
     Capitalized interest ........................        3.7       4.6       2.7       2.4       2.8
     Portion of rents representative of interest
          factor (deemed to be one-third) ........       27.0      21.7      16.8      13.2       9.3
                                                       ------    ------    ------    ------    ------

     Total fixed charges .........................   $  148.9  $  125.7  $   97.8  $   94.4  $  108.1
                                                       ======    ======    ======    ======    ======

Ratio of earnings to fixed charges(A) ............      1.73x     1.99x     2.16x     2.13x     1.83x


<FN>

(A)     The ratio of earnings to fixed  charges  represents  the number of times
        "fixed charges" are covered by "earnings."  "Fixed  charges"  consist of
        interest on outstanding  debt and capitalized  interest,  one-third (the
        proportion deemed representative of the interest factor) of rentals, and
        amortization  of  debt  discount  and  expense.  "Earnings"  consist  of
        consolidated  net income  before income taxes,  fixed  charges,  and, in
        1992, the cumulative  effect of accounting  changes,  less equity in net
        earnings of affiliated companies, net of distributions received.

</FN>
</TABLE>


                                      -38-


<PAGE>


                                                                    EXHIBIT 23




CONSENT OF INDEPENDENT AUDITORS




We consent to the  incorporation  by reference  in  Registration  Statement  No.
33-48475 on Form S-3 filed July 30, 1992, Registration Statement No. 33-52301 on
Form S-3 filed February 16, 1994, and Registration Statement No.33-64697 on Form
S-3 filed December 1, 1995 of General American Transportation Corporation of our
report  dated  January  28,  1997 with  respect  to the  consolidated  financial
statements and schedule of General American Transportation  Corporation included
in this Annual Report on Form 10-K for the year ended December 31, 1996.



                                                              ERNST & YOUNG LLP


Chicago, Illinois
March 14, 1997






                                      -39-


<PAGE>

EXHIBITS FILED WITH DOCUMENT

12.     Statement regarding computation of ratios of earnings to fixed       
        charges.

23.     Consent of Independent Auditors                                      

27.     Financial Data Schedule for GATC for the fiscal year
        ended December 31, 1996, file number 2-54754.  Submitted
        to the SEC along with the electronic submission of this
        report on Form 10-K.

        Any  instrument  defining the rights of security  holders with
        respect to nonregistered long-term debt not being filed on the
        basis that the amount of securities authorized does not exceed
        10 percent of the total assets of the company and subsidiaries
        on a  consolidated  basis will be furnished to the  Commission
        upon request.