SECURITIES AND EXCHANGE COMMISSION
                       WASHINGTON, D.C. 20549

                        _____________________

                              FORM 10-K

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

For fiscal year ended December 31, 1999      Commission File Number 333-19257

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

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


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


         Registrant's telephone number, including Area Code:
                           (847) 945-5591

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

                                            Name of Each Exchange
        Title of Each Class                   On Which Registered
        -------------------                 ---------------------
             None                               N/A

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

                                None

     Indicated by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve (12) months (or for
such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the
past ninety (90) days.

                    Yes __x__                No ____

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

     The number of shares outstanding of Registrant's Common Stock as
of March 13, 2000: 100,000.

<PAGE>


                       TABLE OF CONTENTS
                       -----------------

                                                          PAGE
                                                          ----

Part I

Item 1.   Business                                         3
Item 2.   Properties                                       8
Item 3.   Legal Proceedings                                9
Item 4.   Submission of Matters to a Vote of Security      9
          Holders


Part II

Item 5.   Market for the Registrant's Common Equity
          and Related Stockholder Matters                  9
Item 6.   Selected Financial Data                          10
Item 7.   Management's Discussion and Analysis of
          Financial Condition and Results of               11
          Operations
Item 7A.  Quantitative and Qualitative Disclosures
          About Market Risks                               14
Item 8.   Financial Statements and Supplementary Data      15
Item 9.   Changes In and Disagreements with
          Accountants on  Accounting and Financial         37
          Disclosure


Part III

Item 10.  Directors and Executive Officers                 37
Item 11.  Executive Compensation                           40
Item 12.  Security Ownership of Certain Beneficial         41
          Owners and Management
Item 13.  Certain Relationships and Related                42
          Transactions


Part IV

Item 14.  Exhibits, Financial Statement Schedules,
          and Reports On Form 8-K                          45

          Signatures                                       46



<PAGE>

                               PART I

Item 1.   BUSINESS

The Company

   Motors  and  Gears, Inc. (the "Company") was incorporated  in  the
State  of  Illinois on September 8, 1995.  On November 1,  1996,  the
Company effected a reincorporation merger whereby MK Group, Inc.,  an
Illinois corporation, was merged with and into the Company, with  the
Company being the surviving entity.  The Company is a direct, wholly-
owned  subsidiary  of  Motors and Gears Holdings,  Inc.,  a  Delaware
corporation ("Parent").  The Parent is a majority owned subsidiary of
Jordan Industries, Inc. ("JII"), a private holding company which owns
and  manages  a  widely  diversified group  of  operating  companies.
Preferred  shares  of  stock of the Parent  owned  by  JII  represent
approximately an 82% ownership interest of the Parent.  All remaining
preferred  stock and common stock is owned by executive officers  and
directors of the Company and other employees of JII.  The Company was
organized  by  JII to acquire and operate companies  in  the  motors,
gears   and   motion  control  industries.   The  Company   and   its
subsidiaries are included in JII's consolidated financial statements,
and  will  continue  to  be part of the JII  consolidated  group  for
financial  reporting  and tax purposes until the  redemption  of  the
Parent's Junior Preferred Stock or until such time as the Company can
no longer be consolidated for federal income tax purposes.

   The Company's principal executive offices are located at ArborLake
Centre,  Suite  550, 1751 Lake Cook Road, Deerfield, Illinois  60015,
and its telephone number is (847)945-5591.

Business

  The Company is a manufacturer of specialty purpose electric motors,
gearmotors,  gearboxes,  gears,  transaxles  and  electronic   motion
controls  for  a wide variety of consumer, commercial and  industrial
markets.   The  Company  has  a diverse base  of  customers  and  its
products are used in a broad range of applications including  vending
machines,  golf carts, lift trucks, industrial ventilation equipment,
automated  material  handling systems  and  elevators.   The  Company
competes  primarily  in  the electric motors  and  electronic  motion
control systems industries.

Business Segment Information

   The  Company operates in two separate business segments;  electric
motors ("motors") and electronic motion control systems ("controls").
The  Company  entered  the  controls  business  segment  through  the
acquisition of two companies during 1997(see Note 1 to the  Company's
consolidated  financial statements).  See Note 12  to  the  Company's
consolidated financial statements for financial segment data.

Products

  The Company has established itself as a reliable niche manufacturer
of  high-quality,  economical,  custom electric  motors,  gearmotors,
gears and electronic motion control systems used in a wide variety of
applications including vending machines, refrigerator ice dispensers,
commercial dishwashers, commercial floor care equipment, golf  carts,
lift trucks, automated material handling systems and elevators.   The
Company's  products are custom designed to meet specific  application
requirements.   Less than 5% of the Company's products  are  sold  as
stock products.

   The  Company  offers a wide variety of options to provide  greater
flexibility  in  its custom designs.  These options  include  thermal
protectors,  special mounting brackets, custom leads  and  terminals,
single  or  double  shaft extensions, brakes, cooling  fans,  special
heavy  gearing, custom shaft machining and custom software solutions.
The  Company  also provides value-added assembly work,  incorporating
some  of the above options into its final motor and control products.
All of the custom-tailored motors, gearmotors and control systems are
designed for long life, quiet operation, and superior performance.
<PAGE>

Electric Motors

   Electric  motors  are  devices that convert  electric  power  into
rotating  mechanical  energy.   The amount  of  energy  delivered  is
determined by the level of input power supplied to the electric motor
and  the  size of the motor itself.  An electric motor can be powered
by  alternating current ("AC") or direct current ("DC").  AC power is
generally supplied by power companies directly to homes, offices  and
industrial sites whereas DC power is supplied either through the  use
of  batteries or by converting AC power to DC power.  Both AC  motors
and   DC  motors  can  be  used  to  power  most  applications;   the
determination  is  made  through the consideration  of  power  source
availability,  speed variability requirements, torque considerations,
and noise constraints.

   The  power  output of electric motors is measured  in  horsepower.
Motors  are produced in power outputs that range from less  than  one
horsepower up to thousands of horsepower.

   Subfractional  Motors.   The  Company's  subfractional  horsepower
products   are  comprised  of  motors  and  gearmotors  which   power
applications  up to 30 watts (1/25 horsepower).  These small,  "fist-
size"  AC and DC motors are used in light duty applications  such  as
snack and beverage vending machines, refrigerator ice dispensers  and
photocopy machines.

   Fractional/Integral  Motors.   The  Company's  fractional/integral
horsepower  products are comprised of AC and DC motors and gearmotors
having  power ranges from 1/8 to 100 horsepower.  Primary end markets
for  these motors include commercial floor care equipment, commercial
dishwashers,  commercial  sewing  machines,  industrial   ventilation
equipment, golf carts, lift trucks and elevators.

  Gears and Gearboxes.  Gears and gearboxes are mechanical components
used to transmit mechanical energy from one source to another source.
They are normally used to change the speed and torque characteristics
of  a  power  source such as an electric motor.  Gears and  gearboxes
come  in  various configurations such as helical gears, bevel  gears,
worm  gears,  planetary  gearboxes, and right-angle  gearboxes.   For
certain  applications, an electric motor and a gear box are  combined
to create a gearmotor.

   The Company's precision gear and gearbox products are produced  in
sizes  of  up  to  16  inches in diameter and in  various  customized
configurations  such as pump, bevel, worm and helical gears.  Primary
end   markets   for   these  products  include   original   equipment
manufacturers  ("OEMs") of motors, commercial floor  care  equipment,
aerospace and food processing product equipment.

Electronic Motion Control Systems

   Electronic motion control systems are assemblies of electronic and
electromechanical components that are configured  in  such  a  manner
that the systems have the capability to control various commercial or
industrial  processes  such as conveyor systems,  packaging  systems,
elevators and automated assembly operations.  The components utilized
in  a  motion  control  system are typically  electric  motor  drives
(electronic  controls that vary the speed and torque  characteristics
of   electric   motors),   programmable  logic   controls   ("PLCs"),
transformers,  capacitors, switches and various  types  of  software.
The  majority  of  the  Company's  motion  control  products  control
automated  conveyor  systems  used in  automotive  manufacturing  and
elevators.
<PAGE>

Acquisitions

   In  March 1996 the Company acquired the net assets of Colman, Inc.
and Colman Motor Products, Inc. (collectively, "Barber-Colman").   In
November  1996, the Company acquired the business and net  assets  of
Imperial  Electric Company ("Imperial") and Imperial's  subsidiaries,
Scott  Motor Company ("Scott") and Gear Research, Inc. ("Gear")  from
JII.  In June 1997, the Company purchased all of the common stock  of
FIR  Group Companies ("FIR") consisting of CIME S.p.A., SELIN, S.p.A.
and   FIR  S.p.A.   In  October  1997,  the  Company  purchased   all
outstanding  stock  of E.D. and C. Company, Inc.  through  its  newly
formed wholly owned subsidiary, Electrical Design and Control Company
("ED&C").  In December 1997, the Company acquired all of the stock of
Motion  Control Engineering, Inc. ("Motion Control").  In  May  1998,
the  Company purchased all of the outstanding stock of Advanced  D.C.
Motors,  Inc. and its affiliated corporations ("ADC").   In  December
1998,  the  Company,  through its wholly-owned  subsidiary  Imperial,
acquired all of the stock of Euclid Universal Corporation ("Euclid").
Euclid  was  subsequently merged into Imperial.  See Note  1  to  the
consolidated financial statements.

Backlog

   The Company's approximate backlog of unfilled orders at the dates
specified was as follows:

                                 Backlog
          Year Ended             (Dollars
         December 31,               in
                                thousands)
         -----------          -------------

             1999
            Motors               $54,279
           Controls               26,587
                                  ------
                                 $80,866
                                  ======
             1998
            Motors               $57,831
           Controls               19,079
                                  ------
                                 $76,910
                                  ======

   The  Company  will  ship substantially all of its  1999  year-end
backlog during 2000.

Marketing and Support Services

  The Company's sales and marketing success is characterized by long-
term  customer  relationships which are the result of  continuity  of
management, outstanding delivery records, high-quality products,  and
competitive  pricing.  The Company utilizes a combination  of  direct
sales  personnel  and manufacturers' representatives  to  market  the
Company's product lines.  Generally, the inside sales organization is
compensated   through  a  fixed  salary  while   the   manufacturers'
representative organizations receive commission.

   National  Accounts  Managers serve large  national  OEMs  such  as
General  Electric,  Whirlpool  and  Vendo.   More  than  95%  of  the
Company's  sales are to OEM customers.  However, the  Company  has  a
distribution  program  with four distributors  in  its  subfractional
horsepower  product  line  to  increase coverage  and  generate  more
revenue growth.

   The  Company's motion control systems business is served primarily
through  internal  sales  and  marketing  professionals  as  well  as
independent representatives.  The Company has added sales  talent  to
this  product  group in order to expand its presence into  additional
motion control markets.

   The  Company's  advertising efforts consist  of  specific  product
literature which is printed and provided to customers as applications
are  developed.  In addition, the Company attends various trade shows
to  market products and to stay abreast of industry trends.  It  also
advertises in trade magazines on a periodic basis.
<PAGE>

International Operations

   The  Company currently operates six manufacturing facilities,  one
research  and development facility and one warehouse in Europe.   See
Note 12 to the Company's consolidated financial statements.

Employee and Labor Relations

   As  of December 31, 1999, the Company employed approximately 2,050
employees, of which approximately 1,450 were non-union and  600  were
represented by unions.  The Company has experienced no work stoppages
since inception.  It considers its relations with its employees to be
excellent.

Competition

   The  electric motor and electronic motion control systems  markets
are  highly  fragmented  with a multitude of manufacturing  companies
servicing  numerous markets.  Motor manufacturers  range  from  small
local  producers serving a specific application or end user, to  high
volume  manufacturers offering general-purpose "off the shelf" motors
to   a  wide  variety  of  end  users.    While  there  are  numerous
manufacturers of gears and gearboxes that service a wide  variety  of
industries  and applications, the Company competes in  certain  niche
markets.

   The  Company's motion control systems business competes  primarily
within  the  automated conveyor system controls market and  sells  to
conveyor   manufacturers  that  serve  the  automotive  manufacturing
industry and the elevator modernization market.  These niche  markets
consist of four to five major competitors.

   The  principal  competitive factors  in  the  electric  motor  and
electronic motion control systems markets include price, quality  and
service.   Major  manufacturers  include  General  Electric,   Baldor
Electric  Company,  Emerson Electric Company  and  Reliance  Electric
Company;  however,  the  Company  generally  competes  with  smaller,
specialized   manufacturers.   While  many   of   the   major   motor
manufacturers   have  substantially  greater  assets  and   financial
resources, the Company believes that its leading position in  certain
niche  markets, its high-quality products and its value-added  custom
applications are adequate to meet competition.

Raw Materials and Suppliers

   The  primary  raw  materials used by the Company  to  produce  its
products are steel, copper, and miscellaneous purchased parts such as
endshield  castings,  powdered metal gears,  commutators,  electronic
components  and  packaging  supplies.   All  materials  are   readily
available in the marketplace.  The Company is not dependent upon  any
single supplier in its operations for any materials essential to  its
business or not otherwise commercially available to the Company.  The
Company  has been able to obtain an adequate supply of raw materials,
and   no   shortage  of  raw  materials  is  currently   anticipated.
Surcharges  and/or  raw material price escalation clauses  are  often
used to insulate the Company from fluctuations in prices.

Intellectual Property

   The Company's patents and trademarks taken individually, and as  a
whole, are not critical to the ongoing success of its business.   The
proprietary nature of the Company's products is attributable  to  the
custom  application  designs for particular customers'  needs  rather
than attributable to proprietary patented or licensed technology.

<PAGE>


Environmental Regulation

   The  Company  is  subject  to a variety of  U.S.  Federal,  state,
provincial, local and foreign governmental regulations related to the
storage,  use, discharge and disposal of toxic, volatile or otherwise
hazardous  materials used in its manufacturing processes.   Moreover,
the  Company  anticipates that such laws and regulations will  become
increasingly stringent in the future.  The Company does not currently
anticipate  any  material adverse effect on its  business,  financial
condition  or  results of operations as a result of  compliance  with
U.S.  Federal, state, provincial, local or foreign environmental laws
or   regulations  or  remediation  costs.   However,  some  risk   of
environmental liability and other costs is inherent in the nature  of
the  Company's  business.  For example, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act  of  1980,  as
amended,  the  Company could be responsible for the  necessary  costs
responding to any releases of hazardous substances for disposal.   In
addition,  any failure by the Company to obtain and maintain  permits
that  may be required for manufacturing operations could subject  the
Company   to  suspension  of  its  operations.   Such  liability   or
suspension of manufacturing operations could have a material  adverse
effect   on   the  Company's  results  of  operations  and  financial
condition.

   Soils  and  groundwater, contaminated by historic  waste  handling
practices at the FIR property in Casalmaggiore, Italy are the subject
of  an  investigation and remediation under the review of  government
authorities.   In  connection with the FIR Acquisition,  the  Company
obtained   indemnification   from  the   former   owners   for   this
investigation and remediation.



Item 2.   PROPERTIES

   The  Company's headquarters are located in an approximately 43,700
square  foot office space in Deerfield, Illinois that is provided  by
JII  pursuant  to  the  Transition Agreement (see  Item  13  "Certain
Relationships  and Related Transactions").  The Transition  Agreement
expires in December 2007.

   The principal properties of the Company, the location, the primary
use,  the square feet and the ownership status thereof as of December
31, 1999, are set forth in the table below:

<PAGE>

<TABLE>
<CAPTION>

                                                                         Square      Owned/           Lease
                              Location                    Use             Feet       Leased         Expiration

<S>                 <C>                         <C>                      <C>         <C>       <C>
                    Des Plaines, IL             Design/                     38,000   Leased    September 2000
                                                Administration
   Subfractional    Des Plaines, IL             Manufacturing               45,000   Leased    September 2000
      Products      Darlington, WI              Manufacturing               68,000   Leased    September 2005
                    Richland Center, WI         Manufacturing               45,000   Leased    September 2000
                    Des Plaines, IL             Administration/            112,000   Leased    January 2004
                                                Manufacturing
-------------------------------------------------------------------------------------------------------------------
                    Akron, OH                   Manufacturing               43,000    Owned
                    Stow, OH                    Administration               7,000   Leased    September 2000
                    Middleport, OH              Manufacturing               85,000    Owned
                    Cuyahoga Falls, OH          Manufacturing               63,000   Leased    October 2003
    Fractional/     Alamagordo, NM              Manufacturing               25,800   Leased    October 2002
      Integral      Casalmaggiore,              Administration/            100,000    Owned
     Horsepower       Italy                     Manufacturing
      Products      Varano, Italy               Manufacturing               30,000    Owned
                    Bedonia, Italy              Manufacturing                8,000   Leased    March 2005

                    Genova, Italy               Research &                  33,000   Leased    July 2002
                                                Development/
                                                Manufacturing
                    Reggio Emilia,              Manufacturing/              30,000   Leased    August 2002
                             Italy Distribution
                    Palo Alto, CA               Product Design &             1,000   Leased    April 2000
                                                Development
                    Carrollton, TX              Manufacturing/              29,000   Leased    September 2004
                                                Administration
                    Dewitt, NY                  Manufacturing               18,500   Leased    July 2000
                    Eternoz, France             Manufacturing/              15,000   Leased    October 2004
                                                Administration
                    Syracuse, NY                Manufacturing               45,000   Leased    December 2004
                    Syracuse, NY                Manufacturing/              49,600    Owned
                                                Administration
                    Putzbrunn, Germany          Warehouse                    1,200   Leased    July 2000
-------------------------------------------------------------------------------------------------------------------
                    Troy, MI                    Manufacturing/              29,000   Leased    January 2003
       Motion                                   Administration
      Control       Rancho Cordova, CA          Manufacturing/              40,000   Leased    May 2001
      Systems                                   Administration
                    Rancho Cordova, CA          Administration              45,000   Leased    May 2001
-------------------------------------------------------------------------------------------------------------------
     Gears and      Grand Rapids, MI            Manufacturing/              45,000    Owned
     Gearboxes                                  Administration
                    Oakwood Village, OH         Manufacturing/              25,000   Leased    January 2004
                                                Administration
</TABLE>


   The  Company  believes  that its existing  leased  facilities  are
adequate for the operations of the Company and its subsidiaries.  The
Company  does not believe that any single leased facility is material
to  its operations and that, if necessary, it could readily obtain  a
replacement facility.
<PAGE>

Item 3.   LEGAL PROCEEDINGS

   The  Company  is not a party to any pending legal  proceeding  the
resolution  of  which, the management of the Company believes,  would
have a material adverse effect on the Company's results of operations
or  financial  condition, nor to any other pending legal  proceedings
other than ordinary, routine litigation incidental to its business.


Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matters were submitted to a vote of security holders during the
fiscal year ended December 31, 1999.


                               PART II


Item 5.   MARKET  FOR  THE  REGISTRANT'S COMMON  EQUITY  AND  RELATED
          STOCKHOLDER MATTERS

   The only authorized, issued and outstanding class of capital stock
of  the  Company  is  common stock.  There is no  established  public
trading market for the Company's common stock.  At December 31, 1999,
all common stock of the Company was held by the Parent.

   The  Company  has not declared or paid any cash dividends  on  its
common  stock since the Company's formation in September  1995.   The
Indenture  (the  "Indenture") by and between the  Company  and  State
Street  Bank and Trust Company, as Trustee, with respect to the  10_%
Senior Notes due 2006, contains restrictions on the Company's ability
to  declare  or  pay  dividends on its common stock.   The  Indenture
prohibits  the declaration or payment of any dividends or the  making
of  any distribution by the Company, or any Restricted Subsidiary (as
defined in the Indenture).


Item 6.   SELECTED FINANCIAL DATA

   The  following  table  presents  selected  financial  information
derived   from   the  Company's  and  its  predecessor's   financial
statements  as  well as the combined results of  operations  of  the
predecessor  from  January 1, 1995 to September  22,  1995  and  the
Company from September 23, 1995 to December 31, 1995.
<PAGE>
<TABLE>
<CAPTION>
                                                                               Predecessor
                                                                               and Company
                                                                               Combined (2)                    Predecessor (4)
                                                 Company                                       Company (3)
------------------------------------------------------------------------------------------------------------------------------
                                                                                              September 23,      January 1,
                                                                                                 Through           Through
                                                 Year Ended December 31,                       December 31,     September 22,
                              ---------------------------------------------------------------
                              ------------ ----------- ----------- ----------- --------------
                                 1999        1998        1997        1996          1995            1995             1995
                                 ----        ----        ----        ----          ----            ----             ----

<S>                            <C>          <C>         <C>        <C>            <C>            <C>              <C>
Statement of Operations
Data: (1)
  Net sales                     $307,877    $275,833    $148,669   $117,571       $ 63,979       $ 24,684          $39,295
    Gross profit,
      excluding
      depreciation               111,119      95,380      51,585     41,820         23,437          8,255           15,182
    Depreciation                   5,549       4,492       4,311      2,960            516            415              101
    Amortization                   9,045       8,235       4,704      4,118            840            840                -
    Operating income              50,597      42,324      27,684     23,229         16,369          4,753           11,616
    Interest expense              33,802      32,994      22,363     11,134          2,412          2,412                -
    Income taxes (5)               8,698      (3,072)      2,429      5,290          1,232            948              284
    Net income                     8,618      13,098       3,355      4,834         12,964          1,360           11,604

Supplemental pro forma and
other data:
    Pro forma income
     taxes (6)                  $      -    $      -    $      -   $      -        $ 4,755       $      -          $ 4,755
    Pro forma net
     income                        8,618      13,098       3,355      4,834          8,493          1,360            7,133

Balance sheet data (at end
of period):  (1)
    Working capital             $ 69,363    $ 67,922    $ 65,074   $ 25,632       $ 14,747       $ 14,747          $ 7,697
    Total assets                 382,586     388,821     335,144    175,530        145,387        145,387           14,409
    Long-term
     obligations
     including current
     portion                     313,179     325,816     283,672    175,067         83,547         83,547                -
    Stockholder's
     equity (net
     capital
     deficiency)                  24,159      22,613       7,552    (15,787)        45,925         45,925            9,218
</TABLE>

(1)   The  Company  has  acquired a diversified group  of  operating
  companies over the five-year period, which significantly affects the
  comparability of the information shown.

(2)   Reflects the combined results of operations of the Predecessor
  from  January  1, 1995 to September 22, 1995 and the Company  from
  September 23, 1995 to December 31, 1995. The results of operations of
  Imperial, Scott and Gear are included in the Company's consolidated
  operating  results from September 23, 1995, the date at which  the
  Company and Imperial, Scott and Gear came under the common control of
  JII.

(3)  Reflects the Company's results of operations from September 23,
  1995 through December 31, 1995.

(4)     Reflects the results of operations of the Predecessor  prior
  to its acquisition by the Company on September 22, 1995.

(5)  For the Predecessor, historical net income reflects only certain
  state  income taxes attributable to Merkle-Korff's income for  the
  historical periods presented prior to its acquisition by the Company
  on September 22, 1995, during which it elected to be a subchapter S
  corporation and therefore was not subject to U.S. Federal and certain
  state income taxes.  The Company's taxes reflect a reversal of the
  Company's  valuation allowance of $9,714 for certain deferred  tax
  assets in 1998.

<PAGE>

(6)  Prior to its acquisition by the Company, the Predecessor was an
  S  corporation and therefore was not subject to U.S.  Federal  and
  certain state income taxes.  The pro forma data presented includes an
  unaudited pro forma adjustment for income taxes which would have been
  recorded if the Predecessor had been a C corporation.


Item 7.   MANAGEMENT'S   DISCUSSION  AND   ANALYSIS   OF   FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Overview

   The following discussion and analysis of the Company's results  of
operations and of its liquidity and capital resources should be  read
in  conjunction with the financial statements and the  related  notes
thereto appearing elsewhere in this annual report.

Acquisitions

   A  substantial portion of the Company's growth during 1999,  1998
and  1997  is  the result of acquisitions.  Each of the acquisitions
during  this  three year period have been accounted  for  under  the
purchase  method  of accounting and are included  in  the  Company's
consolidated  financial statements from their  respective  dates  of
acquisition.   As  a  result  of these acquisitions,  the  Company's
combined   results  for  1999,  1998  and  1997  are  not   directly
comparable.

Results of Operations

   The  following  financial information  presents  the  results  of
operations  of  the Company for the years ended December  31,  1999,
1998  and  1997.   The results of operations of  FIR,  ED&C,  Motion
Control, ADC and Euclid are included in the consolidated results  of
operations  since  their acquisition on June 12, 1997,  October  27,
1997,  December  18,  1997,  May 15, 1998  and  December  31,  1998,
respectively.

                                       Year Ended December 31,
                                                  1998      1997
                                    1999 (1)       (1)       (1)
                                        (Dollars in thousands)

Net sales                          $307,877  $275,833    $148,669
Gross profit (excluding             111,119   95,380       51,585
depreciation)
EBITDA(2)                           65,192    55,051       36,699
Operating income                    50,597    42,324       27,684
Interest expense                    33,802    32,994       22,363

Gross margin (excluding                          34.6%   34.7%
depreciation)(3)                    36.1%
EBITDA margin(3)                    21.2         20.0    24.7
Operating margin(3)                 16.4         15.3    18.6

(1)     With the acquisition of ED&C and Motion Control during 1997,
  the  results of operations include operations for both the  motors
  and   controls  segments.   The  controls  segment  accounted  for
  $72,503,  $61,603  and $3,030 of net sales, $27,545,  $23,403  and
  $1,201  of gross profit (excluding depreciation), $11,291,  $9,605
  and  $645  of  EBITDA  (earnings before  interest,  income  taxes,
  depreciation  and  amortization) and $8,367, $7,124  and  $458  of
  operating income for the years ended December 31, 1999,  1998  and
  1997,  respectively.   Note  that the segment  analysis  does  not
  include unallocated corporate overhead and management fees in  the
  EBITDA and operating income calculations.
(2)     EBITDA  is included herein because management believes  that
  certain  investors find it to be a useful tool for  measuring  the
  ability of the Company to service its debt.
(3)    All margins are calculated as a percentage of net sales.

<PAGE>

Year  ended  December 31, 1999 compared to year ended  December  31,
1998

    Net sales increased $32.0 million or 11.6% from $275.8 million in
1998  to  $307.9  million in 1999.  The increase  in  net  sales  was
primarily  driven  by the 1998 acquisition of ADC  and  Euclid  which
accounted  for  $21.8  million of the increase.  Subfractional  motor
sales  decreased  4.1% in 1999 as compared to  1998  largely  due  to
weakness  in  the  vending  markets.   Significant  difficulties   in
international  markets of a major beverage company  are  the  primary
reason  for  this  decline.   In 1999, sales  of  fractional/integral
products   increased  22.8%  including  the  effects  of   the   1998
acquisitions,   and   3.2%  excluding  the  effects   of   the   1998
acquisitions.   The  growth  for fractional/integral  products  is  a
result  of strong performance in the material handling, elevator  and
floor care markets partially offset by a weak European market and  an
unfavorable Euro  exchange rate.  Sales of electronic motion  control
systems increased by 17.7% mainly attributed to continued strength in
the elevator modernization market.

  Operating income increased $8.3 million or 19.5% from $42.3 million
in  1998 to $50.6 million in 1999.  The primary increase in operating
income  was a result of the increase in sales discussed above coupled
with  an  improvement in gross margin from 34.6% in 1998 to 36.1%  in
1999.   The improvement in gross margin is a result of product design
changes, manufacturing process improvements and material cost savings
experienced  throughout the Company due to efforts put forth  by  the
Company's  sourcing  council.   Improvements  in  gross  margin  were
partially  offset by increases in selling, general and administrative
expenses primarily as a result of the 1998 acquisitions and increases
in depreciation due to the 1998 acquisitions and due to a new systems
implementation at one of the Company's subsidiaries.

   The  income  tax benefit during 1998 is primarily  the  result  of
reducing the Company's valuation allowance by $9.7 million related to
deferred  tax  assets  arising  from  the  Company's  acquisition  of
Imperial  on  November 7, 1996 from an affiliate.  The  deferred  tax
assets  pertain to additional tax bases in certain assets related  to
this  transaction.   The  valuation allowance  was  reversed  due  to
continued  profitable  domestic  operating  results  and   based   on
management's assessment that it is more likely than not that  all  of
the  net  deferred tax assets will be realized through future taxable
earnings, or implementation of tax planning strategies.

Year  ended  December 31, 1998 compared to year ended  December  31,
1997

   Net sales increased $127.2 million or 85.5% from $148.7 million in
1997  to  $275.8 million in 1998.  The increase in sales was  largely
due  to the 1998 acquisition of ADC, accounting for $27.2 million  of
the  increase, and the three 1997 acquisitions, accounting for  $85.9
million of the increase.  Subfractional motors sales increased  13.0%
in  1998. The growth in subfractional motors was primarily attributed
to continued strength in the vending and appliance markets. Gears and
gearbox  sales decreased 8.4% in 1998 as a result of a  weaker  floor
care   market  after  a  stronger  than  expected  1997.   Sales   of
fractional/integral  motors  in 1998 increased  121.2%  mainly  as  a
result of the 1998 acquisition of ADC and the 1997 acquisition of the
FIR  Group.   Sales of fractional/integral motors excluding  the  ADC
acquisition  and  the  FIR  acquisition  increased  6.6%   in   1998,
reflecting  market share gains in floor care and a stronger  elevator
market.  The two Controls acquisitions in the fourth quarter of  1997
accounted for $58.6 million of the increased sales.

   Operating  income  increased $14.6 million  or  52.9%  from  $27.7
million  in  1997 to $42.3 million in 1998.  The primary increase  in
operating  income  was due to the increase in sales discussed  above.
Gross  margins  remained relatively constant with a 34.6%  margin  in
1998  versus  a 34.7% margin in 1997.  Increases in selling,  general
and  administrative expenses, depreciation and amortization were  due
principally  to the three 1997 acquisitions and the 1998  acquisition
of  ADC.   These  increases were partially offset by  a  decrease  in
depreciation and other expenses.


<PAGE>

  Interest expense increased $10.6 million from $22.4 million in 1997
to  $33.0 million in 1998, reflecting higher debt levels relating  to
the  financing  of new acquisitions and the Company's  December  1997
$100.0 million debt offering.

  The income tax benefit for the current year is primarily the result
of reducing the Company's valuation allowance by $9.7 million related
to  deferred  tax  assets arising from the Company's  acquisition  of
Imperial  on  November 7, 1996 from an affiliate.  The  deferred  tax
assets  pertain to additional tax bases in certain assets related  to
this  transaction.   The  valuation allowance  was  reversed  due  to
continued  profitable  domestic  operating  results  and   based   on
management's assessment that it is more likely than not that  all  of
the  net  deferred tax assets will be realized through future taxable
earnings, or implementation of tax planning strategies.

Liquidity and Capital Resources

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

   Operating  activities.  Net cash provided by operating  activities
for  the year ended December 31, 1999 was $28.0 million, compared  to
$11.7  million  provided from operating activities  during  the  same
period  in  1998.  The increase in cash from operating activities  is
primarily due to improved working capital performance.

   Investing  activities.  Net cash used in investing activities  was
$7.8 million in 1999 and $70.3 million in 1998.  $65.8 million of the
cash  used  in investing activities in 1998 was related to  the  1998
acquisitions and the Company's investment in an affiliated company.

   Financing activities.  The Company's annual cash interest  expense
on  the  Senior  Notes,  which are due 2006, is  approximately  $29.0
million.   Interest on the Senior Notes is payable  semi-annually  on
May  15  and November 15 of each year.  Interest on the Junior Seller
Notes will be approximately $0.8 million in 2000.

   The Company is party to a Credit Agreement under which the Company
is  able  to  borrow  up  to  approximately  $75.0  million  to  fund
acquisitions  and  provide  working capital  and  for  other  general
corporate  purposes.   Obligations under  the  Credit  Agreement  are
guaranteed by M&G Industries' subsidiaries, and secured by pledges of
the  stock  of M&G Industries' subsidiaries and liens in  respect  of
certain  assets of M&G Industries and its subsidiaries. As  of  March
13,  2000,  the Company has approximately $52.5 million of  available
funds  under this Credit Agreement.  In addition, under the terms  of
the  Series  D  Notes,  the Company is able to  increase  the  credit
facility to approximately $115.0 million.

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

Foreign Currency Impact

   The  Company's  exposure to decreases in  the  value  of  foreign
currency  is protected by its investment in manufacturing facilities
overseas  whose costs, including labor and raw materials,  are  also
denominated  in local currency.  Decreases in the value  of  foreign
currencies  relative  to  the  U.S.  dollar  have  not  resulted  in
significant  losses  from  foreign currency  translation.   However,
there can be no assurance that foreign currency fluctuations in  the
future  would not have an adverse effect on the Company's  business,
financial condition and results of operations.

Seasonality and Inflation

   The  Company's  net  sales typically show no significant  seasonal
variations.

   The  impact of inflation on the Company's operations has not  been
significant to date.  However, there can be no assurance that a  high
rate  of inflation in the future would not have an adverse effect  on
the Company's operating results.

Impact of Year 2000

   The  Company  experienced no significant  disruptions  in  mission
critical   information  technology  and  non-information   technology
systems and believes those systems successfully responded to the Year
2000  date  change.   The  total cost of the Year  2000  project  was
approximately  $3.3  million and was funded  through  operating  cash
flows  and  capital leases.  The majority of these  costs  have  been
capitalized as they relate to new software and equipment.


Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

   The  Company does not engage in hedging or other market  structure
derivative  trading  activities.  Additionally,  the  Company's  debt
obligations are primarily fixed-rate in nature and, as such, are  not
sensitive  to  changes in interest rates.  At December 31,  1999  the
Company  had variable rate debt outstanding of $28.0 million with  an
interest  rate  of  approximately  8.75%.   A  one  percentage  point
increase  in  interest  rates would increase  the  amount  of  annual
interest  paid by approximately $0.3 million.  The Company  does  not
believe  that  its market risk financial instruments on December  31,
1999 would have a material effect on future operations or cash flow.

   The  Company  is  exposed to market risk from changes  in  foreign
currency  exchange  rates, including fluctuations in  the  functional
currency   of   foreign  operations.   The  functional  currency   of
operations  outside  the  United  States  is  the  respective   local
currency.   Foreign  currency translation  effects  are  included  in
accumulated other comprehensive income in shareholder's equity.



<PAGE>

Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                                     PAGE
                                                      NO.

Reports of Independent Auditors                       16

Consolidated  Balance Sheets as  of  December  31,
1999                                                  19
and 1998

Consolidated  Statements of Income for  the  years
ended December 31, 1999, 1998 and 1997                20

Consolidated    Statements    of    Changes     in
Shareholder's Equity (Net Capital Deficiency)  for
the years ended December 31, 1999, 1998 and 1997      21

Consolidated  Statements of  Cash  Flows  for  the
years ended December 31, 1999, 1998 and 1997          22

Notes to Consolidated Financial Statements            23

<PAGE>

                   REPORT OF INDEPENDENT AUDITORS



The Board of Directors and Shareholder
Motors and Gears, Inc.



We  have  audited  the accompanying consolidated  balance  sheets  of
Motors  and  Gears, Inc. as of December 31, 1999  and  1998  and  the
related consolidated statements of income, shareholder's equity,  and
cash  flows for each of the three years in the period ended  December
31, 1999.   Our audits also included the financial statement schedule
listed  in the index at Item 14 (a).  These financial statements  and
schedule  are  the responsibility of the Company's  management.   Our
responsibility is to express an opinion on these financial statements
and the schedule based on our audits.  We did not audit the financial
statements  of  certain subsidiaries whose statements  reflect  total
assets  constituting 34% and 34% as of December 31,  1999  and  1998,
respectively,  and net sales constituting 33% and 34% for  the  years
ended  December  31,  1999  and 1998, respectively,  of  the  related
consolidated totals.  Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar  as
it  relates to data included for these subsidiaries, is based  solely
on the reports of the other auditors.

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.  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 and the  reports
of other auditors provide a reasonable basis for our opinion.

In  our  opinion,  based  on  our audits and  the  reports  of  other
auditors, the financial statements referred to above present  fairly,
in  all  material  respects, the consolidated financial  position  of
Motors  and  Gears,  Inc.  at December 31, 1999  and  1998,  and  the
consolidated results of its operations and its cash flows for each of
the  three years in the period ended December 31, 1999, in conformity
with  accounting principles generally accepted in the United  States.
Also, in 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
March 7, 2000


<PAGE>


              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors of
Motion Control Engineering, Inc.:



We  have  audited the balance sheets of MOTION CONTROL  ENGINEERING,
INC.  (a  California  corporation and a wholly-owned  subsidiary  of
Motors  &  Gears, Inc.) as of December 31, 1999 and  1998,  and  the
related  statements of income, shareholders' equity and  cash  flows
for  the  years  then ended and for the 13 days ended  December  31,
1997.   These  financial  statements are the responsibility  of  the
Company's  management.  Our responsibility is to express an  opinion
on these financial statements 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.  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 financial position of  Motion
Control  Engineering, Inc. as of December 31, 1999 and 1998 and  the
results  of  its  operations and its cash flows for the  years  then
ended and for the 13 days ended December 31, 1997 in conformity with
generally accepted accounting principles.



                              ARTHUR ANDERSEN LLP



Sacramento, California
  January 21, 2000

<PAGE>

                    INDEPENDENT AUDITOR'S REPORT



The Board of Directors
FIR Group Holding Italia S.p.A.



           We  have audited the consolidated balance sheets  of  Fir
Group  Holding Italia S.p.A. (the "Company") as of October 31,  1999
and  1998, and the related consolidated statements of income for the
years  then  ended,  and  the  related  consolidated  statements  of
retained  earnings  and cash flow for the year   ended  October  31,
1999.  These  financial  statements are the  responsibility  of  the
Company's  management.  Our responsibility is to express an  opinion
on these financial statements based on our audit.

           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  misstatements.   An
audit  includes examining, on a test basis, evidence supporting  the
amounts and disclosures in the financial statements.  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 consolidated financial  statements
referred  to  above  present fairly, in all material  respects,  the
financial  position of the Company as of October 31, 1999 and  1998,
and  the results of its operations for the years then ended and  its
cash  flow  for the year ended October 31, 1999, in conformity  with
generally accepted accounting principles.



                              PRICEWATERHOUSECOOPERS S.p.A.


Bologna, 26 January 2000

<PAGE>


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



                                                      December 31,
                                                    1999       1998
ASSETS
Current assets:
  Cash and cash equivalents                      $ 11,260   $  7,016
  Accounts receivable, net of allowance of $850
and $734                                         53,473     51,969
at December 31, 1999 and 1998, respectively
  Inventories                                    44,146     43,318
  Prepaid expenses and other current assets                     3,058
                                                 4,035
     Total current assets                        112,914    105,361

Property, plant and equipment-Net                21,562     22,268
Goodwill-Net                                     223,561    232,058
Deferred financing costs-Net                     12,392     14,182
Deferred income taxes                            2,851      4,868
Investment in affiliate                          7,285      7,285
Other non-current assets                            2,021      2,799
     Total assets                                $382,586
                                                            $388,821

LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
  Accounts payable                               $ 22,670   $ 23,832
  Accrued interest payable                       4,986      4,756
  Accrued expenses and other current liabilities 12,081     7,274
  Due to affiliated company                      2,185      1,216
  Current portion of long term debt                 1,629        361
     Total current liabilities                   43,551     37,439

Long term debt                                   311,550    325,455
Other non-current liabilities                    3,326      3,314

Shareholder's equity:
  Common stock, $.01 par value, 100,000 shares
    authorized, issued and outstanding           1          1
  Additional paid-in capital                     50,005     50,005
  Accumulated other comprehensive income         (5,125)    1,947
  Accumulated deficit                                        (29,340)
                                                 (20,722)
     Total shareholder's equity                    24,159     22,613

     Total liabilities and shareholder's equity  $382,586   $388,821


    See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

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



                                                                         Year Ended December 31,
                                                            ----------------------------------------------------
                                                            ----------------- ---------------- -----------------
                                                                 1999              1998             1997
                                                                 ----              ----             ----

<S>                                                             <C>               <C>               <C>
Net sales                                                       $307,877          $275,833          $148,669
Cost of sales, excluding depreciation                            196,758           180,453            97,084
Selling, general and administrative expenses,
excluding depreciation                                            42,862            37,559            13,370
Depreciation                                                       5,549             4,492             4,311
Amortization of goodwill and other intangibles                     9,045             8,235             4,704
Management fees to affiliated company                              3,066             2,770             1,516
                                                                --------          --------          --------
Operating income                                                  50,597            42,324            27,684

Other (income) expense:
     Interest expense                                             33,802            32,994            22,363
     Interest income                                                (390)             (806)             (463)
     Miscellaneous, net                                             (131)              110                 -
                                                                --------          --------          --------
Income before income taxes                                        17,316            10,026             5,784
Provision/(benefit) for income taxes                               8,698            (3,072)            2,429
                                                                --------          --------          --------

Net income                                                      $  8,618          $ 13,098          $  3,355
                                                                ========          ========          ========
</TABLE>








    See accompanying notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>


                             MOTORS AND GEARS, INC.
     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (NET CAPITAL
                                   DEFICIENCY)
                        (ALL DOLLAR AMOUNTS IN THOUSANDS)



                                                                                                                         Total
                                                                                      Accumulated      Retained       Shareholder's
                                                    Common Stock        Additional       Other         Earnings          Equity
                                               ------------------------
                                               ------------------------
                                                Number of                 Paid-in    Comprehensive   (Accumulated     (Net Capital
                                                                                                                 -
                                                 Shares      Amount       Capital        Income        Deficit)        Deficiency)
                                               -----------------------------------------------------------------------------------


<S>                                              <C>          <C>         <C>            <C>           <C>              <C>
Balance at December 31, 1996                      100,000      $     1     $30,005       $     -        $(45,793)        $(15,787)
  Capital contribution from Parent                      -            -      20,000             -               -           20,000
  Foreign currency translation adjustment               -            -           -           (16)              -              (16)
  Net Income                                            -            -           -             -           3,355            3,355
                                                                                                                          -------
  Comprehensive Income                                  -            -           -             -               -            3,339
                                                  -------      -------     -------       -------        --------          -------

Balance at December 31,1997                       100,000            1      50,005           (16)        (42,438)           7,552
  Foreign currency translation adjustment               -            -           -         1,963               -            1,963
  Net Income                                            -            -           -             -          13,098           13,098
                                                                                                                          -------
  Comprehensive Income                                  -            -           -             -               -           15,061
                                                  -------      -------     -------       -------        --------          -------

Balance at December 31,1998                       100,000            1      50,005         1,947         (29,340)          22,613
  Foreign Currency translation adjustment               -            -           -        (7,072)              -           (7,072)
  Net Income                                            -            -           -             -           8,618            8,618
                                                                                                                          -------
  Comprehensive Income                                  -            -           -             -               -            1,546
                                                  -------      -------     -------       -------        --------          -------

Balance at December 31, 1999                      100,000      $     1     $50,005       $(5,125)       $(20,722)         $24,159
                                                  =======      =======     =======       =======        ========          =======

</TABLE>







          See accompanying notes to consolidated financial statements.


<PAGE>


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


                                            Year Ended December 31,
                                           1999       1998      1997

Cash flows from operating activities:
 Net income                              $ 8,618    $13,098   $  3,355
Adjustments to reconcile net income to
net cash
provided by operating activities:
   Depreciation and amortization          15,884     14,018     10,070
   Provision/(benefit) for deferred        1,133     (5,917)       772
     income taxes

Changes in operating assets and
liabilities (net
 of effects from acquisitions):
   Accounts receivable                    (1,503)   (6,897)     (3,645)
   Inventories                              (828)   (3,017)      1,323
   Prepaid expenses and other                (95)   (1,482)      2,205
   Accounts payable                       (1,161)    3,648         593
   Accrued expenses and other              5,037    (2,603)      4,813
   Non-current assets & liabilities          (54)    1,081         (29)
   Payables to affiliated company            969      (272)       (218)
   Net cash provided by operating         28,000    11,657      19,239
activities

Cash flows from investing activities:
   Capital expenditures, net              (4,171)   (4,964)     (1,497)
   Acquisition of subsidiaries            (3,596)  (58,486)   (121,053)
   Cash acquired in acquisition of            -        412       4,462
     subsidiaries
   Investment in affiliate                    -     (7,285)       -
   Net cash used in investing activities  (7,767)  (70,323)   (118,088

Cash flows from financing activities:
   Proceeds from revolving credit facility 25,000   59,000      72,500
   Repayment of long-term debt               (414)  (2,307)        (33)
   Repayment of borrowings under revolving
   credit facility                        (38,000) (18,000)    (72,500)
   Proceeds from debt issuances -            -        -        104,500
   Senior Notes
   Payment of financing costs               -         -         (6,749)
   Proceeds from capital contribution       -         -         20,000
   from parent
   Payment of consent fee to
    bondholders                             -       (2,550)       -
   Net cash (used in)/provided by
   financing activities                   (13,414)  36,143     117,718
Effect of exchange rate changes on cash    (2,575)     659          -

Net increase/(decrease) in cash and         4,244  (21,864)     18,869
cash equivalents

Cash and cash equivalents at beginning     7,016     28,880     10,011
of period
Cash and cash equivalents at end of      $11,260    $ 7,016   $ 28,880
period


Supplemental disclosures of cash flow
information:
Cash paid during the period for:
   Third Party Interest                  $32,275    $31,286   $20,981
   Income taxes                            5,576      5,257       515
Non cash investing activities:
   Capital leases                          1,284      1,325       107



    See accompanying notes to consolidated financial statements.

<PAGE>


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


1. Description of Business and Acquisitions

   Motors  and  Gears, Inc. (Company), a wholly-owned subsidiary  of
Motors   and   Gears  Holdings,  Inc.  (Parent),  a   majority-owned
subsidiary of Jordan Industries, Inc. (JII), operates in the  motion
control industry.

  On June 12, 1997, the Company purchased all of the common stock of
the  FIR  Group Companies, consisting of CIME S.p.A., SELIN,  S.p.A.
and  FIR  S.p.A.  (collectively "FIR") for  $51,082.   The  purchase
price, including costs incurred directly related to the transaction,
was  allocated to working capital of $16,562; property and equipment
of  $4,918; other long-term assets and liabilities of ($3,442);  and
resulted in an excess purchase price over net identifiable assets of
$33,044.   FIR  is a manufacturer of electric motors and  pumps  for
niche  applications such as pumps for commercial dishwashers, motors
for  industrial sewing machines and motors for industrial  fans  and
ventilators.   FIR's  operations  are  located  in  Italy  and   its
customers are located mainly in Europe.

   On  October 27, 1997, the Company acquired all of the outstanding
stock  of  Electrical Design and Control Company, Inc. ("ED&C")  for
$15,931  in cash and a $3,850 Subordinated Junior Seller  Note.  The
purchase  price, including costs incurred directly  related  to  the
transaction,  was  allocated to working capital of $3,514;  property
and equipment of $81; covenants not to compete of $120; and resulted
in an excess purchase price over net identifiable assets of $16,066.
ED&C is a full-service electrical engineering company which designs,
engineers and manufactures electrical control systems and panels for
material  handling  systems  and  other  like  applications.    ED&C
provides comprehensive design, build and support services to produce
electronic  control panels which regulate the speed and movement  of
conveyor  systems used in a variety of automotive plants  and  other
industrial applications.  ED&C's customers are located mainly in the
United States.

   On  December 18, 1997, the Company purchased all of the stock  of
Motion Control Engineering, Inc. ("Motion Control") for $53,942. The
purchase  price, including costs incurred directly  related  to  the
transaction,  was allocated to working capital of $10,071;  property
and  equipment of $1,428; covenants not to compete of $1,005;  other
long-term assets and liabilities of ($12); and resulted in an excess
purchase price over net identifiable assets of $41,450.  The Company
also  has  a  contingent purchase price agreement  relating  to  the
acquisition  of  Motion Control.  The contingent purchase  price  is
dependent upon the acquired entity's results of operations exceeding
certain  targeted  levels  set substantially  above  the  historical
experience  of  Motion Control at the time of  acquisition.   Motion
Control manufactures electronic motion control products for elevator
markets,  primarily  the  elevator  modernization  market.    Motion
Control's customers are located mainly in the United States.

  On May 15, 1998, the Company acquired all of the outstanding stock
of  Advanced  D.C.  Motors,  Inc. and  its  affiliated  corporations
(collectively  "ADC")  for $59,157.  The purchase  price,  including
costs incurred directly related to the transaction, was allocated to
working  capital  of  $9,345;  property  and  equipment  of  $4,088;
covenants  not  to  compete  of $662;  other  long-term  assets  and
liabilities of $(51); and resulted in an excess purchase price  over
net  identifiable  assets  of  $45,113.   The  Company  also  has  a
contingent  purchase price agreement relating to the acquisition  of
ADC.   The  contingent purchase price is dependent upon the acquired
entity's  results of operations for 1998 and 1999 exceeding  certain
targeted levels set substantially above the historical experience of

<PAGE>

ADC  at  the time of acquisition.  Under this agreement the  Company
paid $3,200 in 1999 related to 1998 operations and expects to pay an
additional $3,200 in 2000 related to 1999 performance.  ADC  designs
and manufactures special purpose, custom designed motors for use  in
electric  lift  trucks, power sweepers, electric  utility  vehicles,
golf  carts,  electric boats, and other niche  products.   ADC  also
designs  and  manufactures some of its own production  equipment  as
well as electric motor components known as commutators.

   On  December  31,  1998,  the Company, through  its  wholly-owned
subsidiary Imperial, acquired all of the outstanding stock of Euclid
Universal  Corporation ("Euclid") for $2,039.  The  purchase  price,
including  costs  incurred directly related to the transaction,  was
allocated  to  working capital of $772; property  and  equipment  of
$953; other long-term assets and liabilities of ($498); and resulted
in  an  excess purchase price over net identifiable assets of  $812.
Euclid  designs  and manufactures speed reducers, customer  gearing,
right  angle  gearboxes and transaxles for use in a  wide  array  of
industries  including material handling, healthcare and floor  care.
Euclid has strong technical expertise in the areas of worm, spur and
helical gearing.

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

  Unaudited annual pro forma information with respect to the Company
as  if the 1998 acquisitions had occurred on January 1, 1998, is  as
follows:

                                       Unaudited Year
                                     Ended December 31,
                                            1998

          Net Sales                      $296,234
          Income before income taxes       11,954
          Net Income                     $  6,574


2. Summary of Significant Accounting Policies

Principles of Consolidation

   The consolidated financial statements include the accounts of the
Company   and  its  wholly-owned  subsidiaries,  Motors  and   Gears
Industries, Inc., Merkle-Korff, Imperial, FIR, ED&C, Motion  Control
and ADC. All significant intercompany transactions and accounts have
been  eliminated.   Operations of certain subsidiaries  outside  the
United  States are included for periods ending two months  prior  to
the   Company's  year-end  and  interim  periods  to  ensure  timely
consolidated financial statements.

Reclassifications

  Certain reclassifications have been made to prior years' financial
statements  in  order  for  them to  conform  to  the  current  year
presentation.

Cash and Cash Equivalents

   Cash  equivalents  consist of highly liquid investments  with  an
initial maturity of three months or less at the time of purchase.

Inventories

  Inventories are stated at the lower of cost or market. Inventories
valued  at  either  average  or  first-in,  first-out  (FIFO)  cost,
accounted for approximately 77% and 74% of the Company's inventories
at  December 31, 1999 and 1998, respectively.  All other inventories
are   valued  using  the  last-in,  first-out  (LIFO)  cost,   which
approximated current cost at December 31, 1999.


<PAGE>

Property, Plant, and Equipment

  Property, plant, and equipment is stated at cost, less accumulated
depreciation. Depreciation is provided using either straight-line or
accelerated  methods over the estimated useful lives of the  assets.
Leasehold improvements and assets under capital leases are amortized
using the straight-line method over the shorter of the lease term or
their   estimated  productive  lives.  Amortization   of   leasehold
improvements  and  assets  under  capital  leases  is  included   in
depreciation expense.

   The  useful  lives  of plant and equipment  for  the  purpose  of
computing book depreciation are as follows:


                   Buildings                    5 to 33 years
                   Machinery and equipment      3 to 10 years
                   Dies and tooling             2 to 5 years
                   Furniture and fixtures       3 to 7 years
                   Vehicles                     3 to 5 years


Foreign Currency Translation

   In accordance with Statement of Financial Accounting Standards No.
52,  "Foreign  Currency Translation," assets and liabilities  of  the
Company's  foreign operations are translated from foreign  currencies
into  U.S.  dollars at the balance sheet date rates while income  and
expenses  are translated at the weighted-average exchange  rates  for
the  year.   The  Company is exposed to market risk from  changes  in
foreign  currency  exchange  rates,  including  fluctuations  in  the
functional currency of foreign operations.  Gains or losses resulting
from  the  translations of foreign currency financial statements  are
deferred  and  classified  as a separate component  of  shareholder's
equity.

Intangible Assets

  Goodwill is being amortized using the straight-line method over 30
years  at Merkle-Korff, FIR, ED&C, Motion Control and ADC and up  to
40  years at Imperial. Goodwill at December 31, 1999 and 1998 is net
of  accumulated  amortization of $29,198 and $20,900,  respectively.
The covenants not to compete are being amortized using the straight-
line  method  over  the  respective terms  of  the  agreements.  The
covenants  not to compete at December 31, 1999 and 1998 are  net  of
accumulated   amortization  of  $1,806  and  $1,174,   respectively.
Deferred  financing  costs  are amortized  using  the  straight-line
method  over  the shorter of the terms of the related loans  or  the
period such loans are expected to be outstanding. Deferred financing
costs  at  December  31,  1999  and  1998  are  net  of  accumulated
amortization  of  $4,807 and $3,016, respectively.  Amortization  of
deferred financing costs is included in interest expense.

Income Taxes

   Deferred  tax  assets  and liabilities are  determined  based  on
differences between the financial reporting and tax bases of  assets
and  liabilities and are measured using the enacted  tax  rates  and
laws that are expected to be in effect when the differences reverse.
The   operating  results  of  the  Company  are  included   in   the
consolidated  federal  income tax return of JII.  In  addition,  the
Company  is party to a tax-sharing agreement with JII. However,  the
Company's income tax provision has been calculated as if the Company
would have filed a separate federal income tax return.


<PAGE>

Revenue Recognition

  Revenues are primarily recognized when products are shipped to
customers.

Use of Estimates

   The  preparation  of  financial  statements  in  conformity  with
generally accepted accounting principles requires management to make
estimates  and assumptions that affect the amounts reported  in  the
financial  statements and accompanying notes. Actual  results  could
differ from those estimates.

Adoption of Accounting Principles

   In  June  1998,  the  FASB issued SFAS No.  133,  Accounting  for
Derivative Instruments and Hedging Activities (Statement 133), which
is  required to be adopted in fiscal quarters beginning  after  June
15,  2000.   Statement 133 requires all derivatives to be recognized
in  the balance sheet as either assets or liabilities at fair value.
Derivatives  that  are  not hedged must be adjusted  to  fair  value
through  income.   In  addition, all hedging relationships  must  be
designated, reassessed and documented pursuant to the provisions  of
SFAS  No.  133.  Management believes the adoption of this  statement
will not have a material effect on the Company.

Financial Instruments

   The  Company's  financial instruments include  cash  equivalents,
trade  accounts receivable, accounts payable, accrued expenses,  the
Senior  Notes,  the  Subordinated Notes, and  the  revolving  credit
facility.   The  fair values of the Company's financial  instruments
are  not materially different from their carrying values at December
31, 1999.

Concentration of Credit Risk

   Financial  instruments which potentially subject the  Company  to
concentration  of credit risk consist principally of cash  and  cash
equivalents and accounts receivable.  The Company deposits cash  and
cash equivalents with high-quality financial institutions, which are
federally insured up to prescribed limits.  Cash balances may exceed
these limits at any given time.

   The  Company closely monitors the credit quality of its customers
and   maintains  allowances  for  potential  credit  losses   which,
historically,  have not been significant and have  been  within  the
range of management's expectations.  The Company generally does  not
require collateral or other security on trade receivables.


<PAGE>

3. Inventories

  Inventories consist of the following:

                                                    December 31,
                                           ---------------------------------
                                                1999              1998
                                                ----              ----
          Raw materials                         $27,262          $27,101
          Work in process                        12,086           10,626
          Finished goods                          4,798            5,591
                                                -------          -------
                                                $44,146          $43,318
                                                =======          =======


4. Property, Plant, and Equipment

  Property, plant, and equipment consists of the following:

                                                          December 31,
                                                  ----------------------------
                                                    1999              1998
                                                    ----              ----
   Land, buildings and improvements               $ 8,103           $ 8,069
   Machinery and equipment                         27,615            25,716
   Furniture and fixtures                           6,321             3,127
   Other (vehicles, dies and tooling)               7,770             7,965
                                                  -------           -------
                                                   49,809            44,877
   Less: Accumulated depreciation
      and amortization                            (28,247)          (22,609)
                                                  -------           -------

                                                  $21,562           $22,268
                                                  =======           =======

5. Short Term Notes Payable

     FIR has a number of short-term borrowing facilities available from
various banks. The total amount available under these facilities is
approximately $14,000 at interest rates ranging from 3.5% to 5.5% at
December 31, 1999. There were no outstanding borrowings under these
arrangements at December 31, 1999 and 1998. A portion of these facilities
are secured by FIR's assets and a portion are in the form of overdraft
coverage.

6. Income Taxes

     Pretax income was taxed in the following jurisdictions:


                                        Year Ended December 31,
                             ------------------------------------------------
                                 1999             1998             1997
                                 ----             ----             ----
   Domestic                   $14,328           $ 4,738           $4,679
   Foreign                      2,988             5,288            1,105
                              -------           -------           ------

                              $17,316           $10,026           $5,784
                              =======           =======           ======



<PAGE>

     The provision/(benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                         -------------------------------------------------
                                           1999                    1998            1997
                                           ----                    ----            ----
 <S>                                      <C>                   <C>             <C>
 Current:
    Federal                               $4,167                $  (954)        $   898
    State                                    981                    (40)            217
    Foreign                                2,417                  3,839             542
                                          -------               -------         -------
    Total current                          7,565                  2,845           1,657

 Deferred:
    Federal                                1,037                 (5,223)            684
    State                                    211                   (667)            151
    Foreign                                 (115)                   (27)            (63)
                                          ------                -------          ------
    Total deferred                         1,133                 (5,917)            772
                                          ------                -------          ------

 Provision/(benefit) for income taxes     $8,698                $(3,072)         $2,429
                                          ======                =======-         ======

</TABLE>


     The  provision/(benefit) for  income taxes differs from the amount of
income tax provision computed by applying the U.S. federal income tax rate
to income before income taxes.  A reconciliation of  the differences is as
follows:

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                          ----------------------------------------------------
                                                                1999             1998               1997
                                                                ----             ----               ----
 <S>                                                         <C>               <C>               <C>
 Computed statutory tax provision                             $5,887            $ 3,409           $1,967
      Increase resulting from:
           State and local taxes, net of
             federal benefit                                     800                463              243
           Higher effective foreign tax rate
                                                               1,305              2,014              103
           Change in valuation allowance                           -             (9,714)               -
           Previously unrecorded deferred
             Taxes                                                 -                448                -
           Nondeductible amortization                            833                674              181
           Other                                                (127)              (366)             (65)
                                                              ------            -------           ------

 Provision/(benefit) for income taxes                         $8,698            $(3,072)          $2,429
                                                              ======            =======           ======
</TABLE>


   The  change  in the Company's valuation allowance  is  related  to
deferred  tax  assets  arising from the Company's  acquisition  of  a
subsidiary on November 7, 1996  from an affiliate.  The deferred  tax
assets  pertain to additional tax bases in certain assets related  to
this  transaction.   The  valuation allowance  was  reversed  due  to
continued  profitable  domestic  operating  results  and   based   on
management's assessment that it is more likely than not that  all  of
the  net  deferred tax assets will be realized through future taxable
earnings, or implementation of tax planning strategies.


<PAGE>

     Deferred tax liabilities and assets are comprised of the following:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                            ---------------------------------
                                                                 1999              1998
                                                                 ----              ----
   <S>                                                         <C>                <C>
   Deferred tax liabilities:
        Goodwill                                                $ 5,973            $ 5,075
        Property, plant and equipment                               184                232
   Foreign deferred taxes                                           478                  -
        Other                                                        67                 66
                                                                -------            -------

   Total deferred tax liabilities                                 6,702              5,373

   Deferred tax assets:
        Property, plant and equipment                             3,931              4,173
        Intangibles other than goodwill                           5,070              5,785
        Vacation accrual                                            407                364
   State tax                                                        610                  -
        Franchise tax                                               262                269
        Employee benefits                                           362                363
        Uniform capitalization                                      133                133
        Allowance for doubtful accounts                             151                 89
        Inventory obsolescence reserve                              352                 84
   Warranty reserve                                                 196                117
   Other                                                            219                120
                                                                --------           -------

   Total deferred tax assets                                     11,693             11,497
                                                                -------            -------
   Net deferred tax assets                                      $ 4,991            $ 6,124
                                                                =======            =======
</TABLE>


     During 1998, the Company recorded $262 of net deferred tax assets in
connection with acquisitions.

7. Long Term Debt

<TABLE>
<CAPTION>

     Long-term debt consists of the following:
                                                                     December 31,
                                                         --------------------------------------
                                                               1999                 1998
                                                               ----                 ----
     <S>                                                    <C>                <C>
     Series D Senior Notes, including $3,500 and
      $4,000 of Unamortized premium at December             $273,500
      31, 1999 and 1998, respectively (A)                                      $274,000
     Revolving Credit Facility (A)                            28,000             41,000
     Subordinated Notes Payable (B)                            8,850              8,850
     Capital leases (C)                                        2,829              1,966
                                                            ---------          --------
                                                             313,179            325,816
     Current Portion                                          (1,629)              (361)
                                                            --------            -------
                                                            $311,550           $325,455
                                                            =========          ========
</TABLE>


   (A)  On  February  23,  1998, the Company completed  an  exchange
        offer  under  which $270,000 of 10 _% Series D Senior  Notes
        ("D  Notes") were exchanged for the $170,000 of B Notes  and
        the  $100,000  of C Notes which were issued and  outstanding
        prior  to  1998.  The terms of the D Notes are substantially
        identical to the terms of the B and C Notes.
<PAGE>

        Interest on the D Notes is payable in arrears on May 15  and
        November  15  of  each  year.  The  D  Notes  are  unsecured
        obligations of the Company and mature on November 15,  2006.
        The D Notes are redeemable at the option of the Company,  in
        whole or in part, at any time on or after November 15, 2001.
        The  Indenture  relating  to the D  Notes  contains  certain
        covenants  which, among other things, restricts the  ability
        of  the  Company  to incur additional indebtedness,  to  pay
        dividends  or  make  other restricted  payments,  engage  in
        transactions with affiliates, to complete certain mergers or
        consolidations,  or  to  enter into  certain  guarantees  of
        indebtedness.

        The  fair value of the Senior Notes was $267,300 at December
        31,  1999.  The fair value was calculated by multiplying the
        face amount by the market price at December 31, 1999.

        The  Company's Credit Agreement, expiring November 7,  2001,
        is  in  the form of a revolving credit facility and provides
        for borrowings of up to $75,000. Borrowings bear interest at
        a  floating rate of LIBOR plus 2.25% (8.75% at December  31,
        1999)  or base rate plus 1.25% (9.75% at December 31, 1999),
        subject to reduction based on the Company's leverage  ratio,
        as  defined.  Unused commitments under the revolving  credit
        facility  are subject to an availability fee of  0.375%  per
        annum  subject to reduction based on the Company's  leverage
        ratio,  as defined. Borrowings are secured by the stock  and
        substantially  all of the assets of the Company.  Borrowings
        outstanding under the revolving credit facility at  December
        31, 1999 and 1998 were $28,000 and $41,000, respectively.

        The  Credit Agreement contains covenants which, among  other
        things, provide for a minimum level of interest coverage, as
        defined, and limit the Company's ability to incur additional
        indebtedness, create liens, make restricted payments, engage
        in affiliate transactions or mergers and consolidations, and
        make asset sales.

  (B)  The  Subordinated  Notes Payable consist  of  a  $5,000  note
        payable  to  the  former shareholder of Merkle-Korff  and  a
        $3,850 note payable to the former shareholders of ED&C.  The
        note  payable  to the former shareholder of Merkle-Korff  is
        due  in  installments beginning December  31,  2000  through
        December  31, 2003 and bears interest at 9% per annum.   The
        note payable to the former ED&C shareholders is due December
        31,  2002  and bears interest at 9% per annum.  These  notes
        are unsecured obligations of the Company.

  (C)  Interest rates on capital leases range from 3.9% to 8.4%  and
        mature in installments through 2005.

   The  future minimum lease payments as of December 31, 1999  under
   capital leases consist of the following:


                2000                      $  827
                2001                         745
                2002                         690
                2003                         660
                2004                         405
                Thereafter                    43
                                          ------
                  Total                    3,370
                Less amount representing
                Interest                    (541)
                                           -----
               Present value of future
                Minimum lease payments    $2,829
                                          ======

<PAGE>


    The present value of the future minimum lease payments approximates
the book value of property, plant and equipment under capital leases at
December 31, 1999.

  Aggregate maturities of long-term debt at December 31, 1999 are as
follows:


                2000                      $  1,629
                2001                        29,842
                2002                         5,682
                2003                         2,098
                2004                           387
                Thereafter                $273,541

8. Leases

   The  Company leases certain land, buildings, and equipment  under
noncancellable operating lease agreements expiring in various  years
through  2007.   Minimum  future  lease  payments,  by  year,  under
noncancellable operating leases including those with related parties
(Note 10), are as follows at December 31, 1999:

                 2000                        $2,547
                 2001                         1,780
                 2002                         1,710
                 2003                         1,504
                 2004                           746
                 Thereafter                  $1,715

   Total  rent expense was $3,586, $3,777 and $1,951 for  the  years
ended December 31, 1999, 1998 and 1997, respectively.

9. Benefit Plans

    Certain  of the Company's subsidiaries participate  in  the  JII
401(k)  Savings Plan (the "Plan"), a defined-contribution  plan  for
salaried and hourly employees.  In order to participate in the Plan,
employees  must  be at least 21 years old and have worked  at  least
1,000 hours during the first 12 months of employment.  Each eligible
employee  may  contribute from 1% to 15% of their  before-tax  wages
into  the  Plan.   In  addition  to the  JII  401(k)  Plan,  certain
subsidiaries  have additional defined contribution  plans  in  which
employees may participate.  The Company made contributions to  these
plans  totaling approximately $1,451, $1,353 and $671 for the  years
ended December 31, 1999, 1998 and 1997, respectively.

   FIR  provides for a severance liability for all employees at 7.4%
of  each  respective  employee's annual salary.   In  addition,  the
amount accrued is adjusted each year according to an official  index
(equivalent to 0.75% of the retail price index).  This obligation is
payable  to employees when they leave the employ of the Company  and
approximated  $2,900  and  $3,069 at December  31,  1999  and  1998,
respectively.

10.  Related Party Transactions

  Services  Agreements.   Until July 24, 1997,  the  Parent  and  its
subsidiaries  (including  the Company) had  been  charged  an  annual
management  and advisory fee by JII equal to 1.0% of its  net  sales.
Management   and   advisory  fees  charged  to   the   Company   were
approximately $800 for the period from January 1, 1997  to  July  24,
1997.   The  Company was also obligated to pay to The Jordan  Company
(i)  an  investment banking and sponsorship fee of up to 2.0% of  the
purchase price of certain acquisitions or sales involving the Company
or  any of its subsidiaries, (ii) a financial consulting fee of up to
1.0%  of  any debt, equity or other financing arranged by the Company
with the assistance of The Jordan Company and (iii) reimbursement for


<PAGE>
out-of-pocket costs; provided, that such fees may be paid,  in  whole
or  in  part,  to  JII, upon the mutual agreement  of  the  board  of
directors  of  JII  and The Jordan Company. These  arrangements  were
terminated  as of July 25, 1997 and replaced with five new  types  of
agreements and arrangements which are described below.

   First, the Company and each of its subsidiaries entered into a new
advisory  agreement  (the "New Subsidiary Advisory  Agreement")  with
JII,  pursuant to which the Company and its subsidiaries are  charged
by  JII (i) investment banking and sponsorship fees of up to 2.0%  of
the   purchase  price  of  acquisitions,  joint  ventures,   minority
investments  or  sales involving the Company and its subsidiaries  or
their respective businesses or properties (which were $36, $1,092 and
$2,379  in  1999,  1998, and for the period from  July  25,  1997  to
December 31, 1997, respectively); (ii) financial advisory fees of  up
to  1.0%  of  any  debt,  equity or other  financing  or  refinancing
involving the Company or such subsidiary, in each case, arranged with
the  assistance of The Jordan Company or its affiliates  (which  were
$0,  $400  and $1,045 in 1999, 1998 and for the period from July  25,
1997 to December 31, 1997, respectively); and (iii) reimbursement for
The  Jordan Company's or JII's out-of-pocket costs in connection with
providing such services (which were $0, $100 and $0 in 1999, 1998 and
for   the   period  from  July  25,  1997  to  December   31,   1997,
respectively).   The  New Subsidiary Advisory  Agreement  expires  in
December  2007, but is automatically renewed for successive  one-year
terms, unless either party provides written notice of termination  60
days prior to the scheduled renewal date.

   Second,  the Company and each of its subsidiaries entered  into  a
management  consulting  agreement  (the  "New  Subsidiary  Consulting
Agreement"),  pursuant  to  which they  are  charged  by  JII  annual
consulting fees of 1.0% of the Company's net sales for such  services
and are required to reimburse JII for its out-of-pocket costs related
to  its services.  The New Subsidiary Consulting Agreement expires in
December  2007, but is automatically renewed for successive  one-year
terms, unless either party provides written notice of termination  60
days  prior  to  the  scheduled renewal date.  Pursuant  to  the  New
Subsidiary  Consulting Agreement, JII (but not JII's  affiliates)  is
obligated   to  present  all  acquisition,  business  and  investment
opportunities that relate to manufacturing, assembly, distribution or
marketing  of products and services in the motors, gears  and  motion
control industries to the Company, and JII is not permitted to pursue
such  opportunities  or  present them to  third  parties  unless  the
Company  determines  not  to  pursue such opportunities  or  consents
thereto.   In  accordance  with  this  agreement,  the  Company  paid
approximately  $2,739, $2,770 and $700 for the years  ended  December
31,  1999, 1998 and for the period from July 25, 1997 to December 31,
1997, respectively.

   Third,  the  Company and each of its subsidiaries entered  into  a
services agreement (the "JI Properties Services Agreement")  with  JI
Properties, Inc. ("JI Properties"), a subsidiary of JII, pursuant  to
which  JI  Properties provides certain real estate and other  assets,
transportation and related services to the Company.  Pursuant to  the
JI  Properties  Services Agreement, the Company is  charged  for  its
allocable  portion  of such services based upon  its  usage  of  such
services and its relative revenues, as compared to JII and its  other
subsidiaries.  In accordance with this agreement, such  charges  were
$1,593,  $1,214 and $341 for the years ended December 31, 1999,  1998
and  for  the  period  from  July 25,  1997  to  December  31,  1997,
respectively.   The  JI  Properties  Services  Agreement  expires  in
December  2007, but is automatically renewed for successive  one-year
terms, unless either party provides written notice of termination  60
days prior to the scheduled renewal date.


<PAGE>

   Fourth,  JII refined the allocation of its overhead,  general  and
administrative  charges and expense among JII and  its  subsidiaries,
including the Company, in order to more closely match these  overhead
charges with the revenues and usage of corporate overhead by JII  and
its  subsidiaries.  Under  this agreement,  the  Company's  allocable
portion  of  corporate expenses was $2,152, $2,136 and $690  for  the
years ended December 31, 1999, 1998 and for the period from July  25,
1997 to December 31, 1997, respectively.

   Fifth,  the Company and JII entered into the transition  agreement
(the  "Transition Agreement") pursuant to which JII  provides  office
space  and  certain  administrative and accounting  services  to  the
Company  to  facilitate the operations of the Company.   The  Company
reimburses  JII  for  services provided pursuant  to  the  Transition
Agreement  on  an  allocated cost basis.   The  Transition  Agreement
expires  on  December  31,  2000, but is  automatically  renewed  for
successive  one  year  periods (unless either  party  provides  prior
written   notice  of  non-renewal)  through  2007.   The   Transition
Agreement  may  be  terminated by the Company  on  90  days'  written
notice.

   Tax  Sharing  Agreement.  The Company and each of its subsidiaries
are  party  to a Tax Sharing Agreement (the "Tax Sharing  Agreement")
among  JII  and  each  of its consolidated subsidiaries  for  federal
income tax purposes.  Pursuant to the Tax Sharing Agreement, each  of
the consolidated subsidiaries of JII pays to JII, on an annual basis,
an  amount  determined  by  reference  to  the  separate  return  tax
liability of the subsidiary as defined in Treasury Regulation 1.1552-
1(a)(2)(ii).   For the years ended December 31, 1999  and  1998,  the
income  tax  payments  by the Company to JII under  the  Tax  Sharing
Agreement  were  $1,000 and $2,087, respectively.  These  income  tax
payments   reflected  a  federal  and  state  income  tax   rate   of
approximately 39% of each U.S. subsidiaries' pre-tax income.

    Related  Party  Leases.   The  Company  leases  certain   plants,
warehouses,  and  offices under net leases from affiliated  entities.
Rent  expense,  including  real estate taxes  attributable  to  these
leases,  amounted  to  $1,657, $1,602 and $951 for  the  years  ended
December  31,  1999,  1998 and 1997, respectively.    Future  minimum
rental payments required under these leases are as follows:

                2000                         $1,134
                2001                            540
                2002                            540
                2003                            540
                2004                            540
                Thereafter                   $1,575

   Investment in Affiliate.   In November 1998, the Company invested
$5,600  in  Class A Preferred Stock and $1,700 in Class B  Preferred
Stock  of  JZ  International, Ltd.  The Company may make  additional
investments  in  JZ International's Class A Preferred  Stock  up  to
approximately $5,000.  JZ International's Chief Executive Officer is
David  W.  Zalaznick, and its stockholders include  Messrs.  Jordan,
Quinn,  Zalaznick and Boucher, who are the Company's  directors  and
stockholders, as well as other partners, principals and  associates.
JZ  International is a merchant bank located in London, England that
is  focused  on making European and other international investments.
The Company is accounting for this investment under the cost method.
At  December 31, 1999 the cost of the investment approximates market
value.

  Legal Fees.  An individual who is a shareholder, Director, General
Counsel and Secretary of the Parent is also a partner in a law  firm
used  by the Company. The firm was paid $180, $388 and $202 in  fees
and  expenses  during the years ended December 31,  1999,  1998  and
1997,  respectively. The rates charged to the Company were at  arms-
length.


<PAGE>

  Due to affiliated company (JII) consists of:

                                              December 31,
                                        ---------------------------
                                             1999      1998
                                             ----      ----
        Management fee                     $  559    $  232
        Overhead allocation and other       1,626       984
                                           ------    ------
                                           $2,185    $1,216
                                           ======     =====


11.  Additional Purchase Price Arrangements

   The  terms  of the Company's Motion Control acquisition  agreement
provides  for  additional consideration to be paid  if  the  acquired
entity's  results  of  operations  exceed  certain  targeted  levels.
Targeted levels are set substantially above the historical experience
of  the  acquired entity at the time of acquisition.   The  agreement
becomes  exercisable  in  2003  and  payments,  if  any,  under   the
contingent agreement will be placed in a trust and paid out  in  cash
in equal annual installments over a four year period.

   The terms of the Company's ADC acquisition agreement provides  for
additional consideration to be paid if the acquired entity's  results
of  operations exceed certain targeted levels.  Targeted  levels  are
set  substantially above the historical experience  of  the  acquired
entity  at  the  time  of  acquisition.  Subject  to  the  terms  and
conditions  of the agreement, the Company will make payments  to  the
sellers on or before April first immediately following the respective
fiscal year during which each such contingent payment is earned.  The
remaining  contingent  payments apply to operations  of  fiscal  year
1999.  The Company made a payment of $3,200 to the sellers of ADC  in
March 1999 related to this agreement and expects to pay an additional
$3,200  in  2000.   These  contingent payments  are  recorded  as  an
addition to goodwill.

12.  Segment Data

Description of Segments

   The Company operates in two separate business segments; motors and
controls.   The  motors  segment consists  of  subfractional  motors,
fractional/integral  motors, and gears and gearboxes.   The  controls
segment consists of motion control systems.

   The  Company's subfractional horsepower products are comprised  of
motors  and gearmotors which power applications up to 30 watts  (1/25
horsepower).  These small, "fist-size" AC and DC motors are  used  in
light  duty applications such as snack and beverage vending machines,
refrigerator ice dispensers and photocopy machines.

  The Company's fractional/integral horsepower products are comprised
of  AC  and DC motors and gearmotors having power ranges from 1/8  to
300  horsepower.  Key end markets for these motors include commercial
floor  care  equipment,  commercial  dishwashers,  commercial  sewing
machines,  industrial ventilation equipment, golf carts, lift  trucks
and elevators.

   The Company's precision gear and gearbox products are produced  in
sizes  of  up  to  16  inches in diameter and in  various  customized
configurations such as pump, bevel, worm and helical gears.  Key  end
markets  for  these products include original equipment manufacturers
("OEMs")  of  motors, commercial floor care equipment, aerospace  and
food processing product equipment.

   The  Company's  motion  control  systems  are  used  primarily  in
automated  conveyor systems within the automotive  industry  and  the
elevator modernization market.  The systems typically control several
components  such  as electric motors, hydraulic or pneumatic  valves,
actuators and switches that are required for the conveyor or elevator
systems to function properly.


<PAGE>

Measurement of Segment Operating Income and Segment Assets

   The Company evaluates performance and allocates resources based on
operating income.  The accounting policies of the reportable segments
are  the  same as those described in Note 2, "Summary of  Significant
Accounting Policies."  No single customer accounts for 10% or more of
consolidated net sales.  Identifiable assets are those used  by  each
segment  in  its operations.  Corporate assets consist  primarily  of
cash and deferred financing fees.

Factors Used to Identify the Enterprise's Reportable Segments

   The  Company's reportable segments are business units  that  offer
different  products.   The  reportable  segments  are  each   managed
separately because they manufacture  and distribute distinct products
with different production processes.


<PAGE>

<TABLE>
<CAPTION>

     Summary financial information by business segment is as follows:

                                                          Year Ended
                                                         December 31,
                                     -----------------------------------------------------
                                           1999              1998           1997
                                           ----              ----           ----
<S>                                       <C>               <C>             <C>
Net Sales
Motors                                    $235,374          $214,230        $145,639
Controls                                    72,503            61,603           3,030
                                          --------          --------        --------
                                          $307,877          $275,833        $148,669
                                          ========          ========        ========

Operating Income
Motors                                    $ 51,076          $ 43,850        $ 30,588
Controls                                     8,367             7,124             458
Corporate Expenses (1)                      (8,846)           (8,650)         (3,362)
                                          --------          --------        --------
    Total Operating Income                  50,597            42,324          27,684
Interest Expense                           (33,802)          (32,994)        (22,363)
Interest Income                                390               806             463
Miscellaneous, net                             131              (110)              -
                                          --------          --------         -------
  Income before Income Tax                $ 17,316          $ 10,026         $ 5,784
                                          ========          ========         =======

Identifiable Assets
Motors                                    $272,282          $284,215        $211,135
Controls                                    87,207            80,039          79,263
Corporate                                   23,097            24,567          44,746
                                          --------          --------        --------
                                          $382,586          $388,821        $335,144
                                          ========          ========        ========

Capital Expenditures
Motors                                    $  3,087          $  4,164        $  1,392
Controls                                     1,169             1,011             105
                                          --------          --------        --------
                                          $  4,256          $  5,175        $  1,497
                                          ========          ========        ========

Depreciation
Motors                                    $  4,726          $  4,101        $  4,283
Controls                                       823               391              28
                                          --------          --------        --------
                                          $  5,549          $  4,492        $  4,311
                                          ========          ========        ========

Amortization
Motors                                    $  6,945          $  6,146        $  4,544
Controls                                     2,100             2,089             160
                                          --------          --------        --------
                                          $  9,045          $  8,235        $  4,704
                                          ========          ========        ========
</TABLE>

     (1)   Management fees paid to affiliated company have been included
       in corporate expenses.

<PAGE>



  Summary financial information by geographic area is as follows:

<TABLE>
<CAPTION>

                                                            Year Ended
                                                           December 31,
                                          ------------------------------------------------
                                               1999            1998         1997
                                               ----            ----         ----

<S>                                          <C>             <C>             <C>
Net sales to unaffiliated customers
United States                                 $263,242        $232,880        $133,912
Europe                                          44,635          42,953          14,757
                                              --------        --------        --------
                                              $307,877        $275,833        $148,669
                                              ========        ========        ========

Identifiable assets
United States                                 $ 24,136        $ 22,548        $ 10,371
Europe                                           5,215           6,383           5,075
                                              --------        --------        --------
                                              $ 29,351        $ 28,931        $ 15,446
                                              ========        ========        ========
</TABLE>


13. Legal Proceedings

  The Company is subject to legal proceedings and claims which arise
in the ordinary course of its business.  The Company believes that
the final disposition of such matters will not have a material
adverse effect on the financial position or results of operations of
the Company.

14. Subsequent Events

   In December 1999, the Company, through its wholly-owned subsidiary
FIR,  acquired  certain  net assets of the L'Europea  Electric  Hoist
division  ("L'Europea")  from  Pramac Industriale  for  approximately
$5,200.

   L'Europea  hoists  are  electric pulleys and  elevators  used  for
lifting  applications mainly found at construction sites.   As  FIR's
operations  are included for periods ending two months prior  to  the
Company's  year-end and interim periods (see Note 2) the  effects  of
this transaction are not included in the Company's 1999 results.




<PAGE>


Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

                              PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS

   The  following  sets forth the names and ages  of  the  Company's
directors,  executive  officers and  other  key  employees  and  the
positions they hold as of the date of this annual report:

    Name              Age          Position with Company

Thomas H. Quinn       52   Chairman
Ron A. Sansom         40   Chief Executive Officer and a Director
Norman Bates          38   Chief Financial Officer
Randall Bays          44   President, Imperial
G. Barry Lawrence     53   President, Gear
John W. Brown         63   Chairman, Merkle-Korff
Paul Boggs            50   President, Merkle-Korff
Paolo Bergamaschi     30   President, FIR
Todd Williams         42   President, Electrical Design
Javad Rahimian        49   President, Motion Control
William Rodgers       65   Chairman, Advanced DC Motors
Michael Dieroff       32   President, Advanced DC Motors
Jonathan F. Boucher   43   Vice President and a Director
John W. Jordan, II    52   Director
David W. Zalaznick    45   Director
John D. Simms, Sr.    72   Director

   Set forth below is a brief description of the business experience
of each director and executive officer of the Company.

   Mr.  Quinn  has  served  as Chairman of  the  Company  since  its
inception. Since 1988, Mr. Quinn has been President, Chief Operating
Officer and a director of JII. Mr. Quinn is also the Chairman of the
Board and Chief Executive Officer of Archibald Candy Corporation, as
well as a director of AmeriKing, Inc., Welcome Home, and a number of
other privately held companies.

  Mr. Sansom has served as Chief Executive Officer and a director of
the  Company  since  June 1996. Prior to joining  the  Company,  Mr.
Sansom   held  several  senior  management  positions  with  General
Electric  from  1981 to 1996, including General Manager  of  General
Electric's Appliance Components business.

   Mr.  Bates  has served as Chief Financial Officer of the  Company
since April, 1997.   Prior to that, Mr. Bates held several financial
management  positions  with  General Electric  from  1984  to  1997,
including Finance Manager of General Electric's Appliance Components
business.

   Mr.  Bays  has served as the President of Imperial  since  April,
1997.   Prior  to  that,  Mr.  Bays held several  senior  management
positions in General Electric's motor and control business from 1991
to  1997.   Prior to that, Mr. Bays held senior management positions
in Bomar, Inc.'s electronics business.

   Mr. Lawrence has served as President of Gear since 1991. Prior to
that,  Mr.  Lawrence held several senior management  positions  with
Gear since 1978.

  Mr. Brown has served as Chairman of Merkle-Korff since 1999.  From
1993 to 1999 Mr. Brown served as Merkle-Korff's President. Prior  to
that, Mr. Brown held several senior management positions with Merkle-
Korff  since  the  1950's, including Executive Vice President  until
1993.


<PAGE>

   Mr.  Boggs  has served as President of Merkle-Korff  since  1999.
From  1996  through 1999, Mr. Boggs was a Business Team  leader  for
certain motors and controls divisions of General Electric.  Prior to
that  Mr.  Boggs  held several management and engineering  positions
with General Electric.

   Mr.  Bergamaschi has served as the President of FIR  since  1998.
Prior  to  that,  Mr. Bergamaschi held several management  positions
within FIR.

   Mr.  Williams has served as the President of ED&C since September
1998.   Prior  to  that,  Mr. Williams was a  partner  and  original
founder of a consulting company providing management, operating  and
marketing support activities for a variety of companies.  From  1985
to  1992, Mr. Williams held senior management positions at McDonnell
Douglas Corporation.

   Mr. Rahimian has served as President of Motion Control since  its
inception  in  1983.  Prior to that, Mr. Rahimian  was  employed  by
Elevator Industries as an engineering specialist.

   Mr.  Dieroff  has served as the President of ADC since  September
1999.   From May 1997 to September 1999, Mr. Dieroff held management
positions  at  ADC.   Prior  to  that,  Mr.  Dieroff  held   various
management positions at Emerson Electric.

   Mr. Rodgers has served as Chairman of ADC since 1999.  From ADC's
inception  in 1989 through 1999, Mr. Rodgers served as President  of
ADC.   Prior to 1989, Mr. Rodgers held several management  positions
at Prestolite.

   Mr. Boucher has served as a Vice President and a director of  the
Company  since its inception.  Since 1983, Mr. Boucher  has  been  a
partner of The Jordan Company, a private merchant banking firm.  Mr.
Boucher  is  also a director of JII as well as other privately  held
companies.

   Mr.  Jordan  has  served as a director of the Company  since  its
inception. Mr. Jordan is a managing partner of The Jordan Company, a
private  merchant banking firm which he founded in 1982. Mr.  Jordan
is  also a director of JII, AmeriKing, Inc., Carmike Cinemas,  Inc.,
Archibald  Candy Corporation, Welcome Home, Inc., GFSI,  Inc.,  GFSI
Holdings, Inc., Rockshox, Inc. and Apparel Ventures, Inc. as well as
other privately held companies.

   Mr.  Zalaznick has served as a director of the Company since June
1996.  Since 1982, Mr. Zalaznick has been a managing partner of  The
Jordan  Company. Mr. Zalaznick is also a director of JII, AmeriKing,
Inc.,   Carmike  Cinemas,  Inc.,  Marisa  Christina,  Inc.,  Apparel
Ventures,  Inc.,  Jackson  Products,  Inc.,  GFSI,  Inc.  and   GFSI
Holdings, Inc. as well as other privately held companies.

  Mr. Simms has served as a director of the Company since 1998.  Mr.
Simms  was  the owner of Merkle-Korff from 1966 until September  22,
1995 when Merkle-Korff was purchased by the Company.  Mr. Simms  has
nearly fifty years of experience in the electric motor business.


<PAGE>


Board of Directors

   Liability  Limitation. The Certificate of Incorporation  provides
that a director of the Company shall not be personally liable to  it
or  its  stockholders  for monetary damages to  the  fullest  extent
permitted  by Delaware Corporation Law. In accordance with  Delaware
Corporation Law, the Certificate of Incorporation does not eliminate
or  limit  the  liability of a director for acts or  omissions  that
involve  intentional misconduct by a director or a knowing violation
of  law  by  a  director  for  voting or assenting  to  an  unlawful
distribution,  or for any transaction from which the  director  will
personally  receive  a benefit in money, property,  or  services  to
which the director is not legally entitled. Delaware Corporation Law
does  not affect the availability of equitable remedies such  as  an
injunction or rescission based upon a director's breach of his  duty
of   care.  Any  amendment  to  these  provisions  of  the  Delaware
Corporation Law will automatically be incorporated by reference into
the Certificate of Incorporation and the Bylaws, without any vote on
the part of its stockholders, unless otherwise required.

   Indemnification Agreements. The Company and each of its directors
and  certain  executive officers have entered  into  indemnification
agreements. The indemnification agreements provide that the  Company
will  indemnify the directors against certain liabilities (including
settlements) and expenses actually and reasonably incurred  by  them
in   connection  with  any  threatened  or  pending  legal   action,
proceeding or investigation (other than actions brought by or in the
right  of the Company) to which any of them is, or is threatened  to
be, made a party by reason of their status as a director, officer or
agent  of  the Company, or serving at the request of the Company  in
any  other  capacity for or on behalf of the Company; provided  that
(i) such director acted in good faith and in a manner not opposed to
the  best interest of the Company, (ii) with respect to any criminal
proceedings  had no reasonable cause to believe his or  her  conduct
was  unlawful,  (iii) such director is not finally  adjudged  to  be
liable for negligence or misconduct in the performance of his or her
duty  to  the  Company,  unless the court  views  in  light  of  the
circumstances   the   director   is   nevertheless    entitled    to
indemnification, and (iv) the indemnification does not relate to any
liability arising under Section 16(b) of the Securities Exchange Act
of   1934,  as  amended  (the  "Exchange  Act"),  or  the  rules  or
regulations  promulgated  thereunder. With  respect  to  any  action
brought  by  or  in  the right of the Company,  directors  are  also
indemnified to the extent not prohibited by applicable  laws  or  as
determined  by  a court of competent jurisdiction, against  expenses
actually  and  reasonably incurred by them in connection  with  such
action  if  they acted in good faith and in a manner they reasonably
believed  to  be  in  or not opposed to the best  interests  of  the
Company.


<PAGE>

Item 11.  EXECUTIVE COMPENSATION

Directors' Compensation

  Directors of the Company receive $20,000 per year for serving as a
director  of  the  Company.  In  addition,  the  Company  reimburses
directors for their travel and other expenses incurred in connection
with attending meetings of the Board of Directors.

Executive Compensation

   The  following table sets forth a summary of certain  information
regarding  compensation paid or accrued by the Company for  services
rendered to the Company for the fiscal year ended December 31,  1999
to  those  persons who were, at December 31, 1999: (i) the Company's
chief  executive  officer and (ii) the Company's  four  most  highly
compensated  executive  officers  other  than  the  chief  executive
officer  whose total salary and bonus exceeded $100,000 during  such
period.

<TABLE>
<CAPTION>

                                         Annual
                                       Compensation
                                                                             Other Annual
Name and Principal Position               Year         Salary     Bonus     Compensation(1)
----------------------------              -----        ------     -----     ---------------
<S>                                       <C>            <C>       <C>           <C>
Thomas H. Quinn(2)                        1999           $ 0       $ 0           $ -
   Chairman of the Board
Ron A. Sansom(2)                          1999             0         0             -
   Chief Executive Officer
Norman R. Bates(2)                        1999             0         0             -
  Chief Financial Officer
</TABLE>


(1)   For the periods indicated, no executive officer named in the
  table  received  any Other Annual Compensation  in  an  amount  in
  excess  of  the lesser of either $50,000 or 10% of  the  total  of
  Annual  Salary  and  Bonus reported for him in the  two  preceding
  columns.
(2)   Does  not reflect compensation paid to Messrs. Quinn,  Sansom,
  and Bates by JII.

   The  Company  does not maintain a stock option or stock  purchase
plan  and  has  not  awarded any of its employees  individual  stock
option grants.

Compensation Committee Interlock and Insider Participation

  The Board of Directors does not maintain a Compensation Committee.
During  fiscal  1999,  however, Messrs. Boucher,  Jordan  and  Quinn
participated  in deliberations of the Board of Directors  concerning
executive  officer  compensation.   During  1999,  certain  of   the
foregoing  executive  officers of the Company served  and  currently
serve as directors, executive officers and members of a compensation
committee of another entity, one of whose executive officers  served
and currently serves as a director of the Company.



<PAGE>

Item  12.   SECURITY  OWNERSHIP  OF CERTAIN  BENEFICIAL  OWNERS  AND
MANAGEMENT

   All  of  the outstanding common stock of the Company is owned  by
Parent.  The  table below sets forth as of March  13,  2000  certain
information  regarding beneficial ownership of the common  stock  of
Parent held by (i) each of its directors and executive officers  who
own  shares  of  common  stock of Parent,  (ii)  all  directors  and
executive officers of Parent as a group and (iii) each person  known
by  Parent to own beneficially more than 5% of its common stock. The
Company  believes  that  each individual or entity  named  has  sole
investment  and voting power with respect to shares of common  stock
of  Parent  indicated  as  beneficially owned  by  them,  except  as
otherwise noted.

<TABLE>
<CAPTION>
                                                        Amount of Beneficial Ownership(1)
                                                        -----------------------------------
                                                           Number of        Percentage
                                                             Shares           Owned

<S>                                                        <C>               <C>
Executive Officers and Directors:
Ron A. Sansom                                                   300.0000       1.5%
John W. Jordan II(2)(3)(4)(5)                                 7,136.8809       36.2
David W. Zalaznick(2)(4)(6)                                   3,531.2473       17.9
Jonathan F. Boucher(2)                                        1,116.5587       5.7
Thomas H. Quinn(2)                                            1,799.7294       9.1
All directors and executive officers as a
 Group (12 persons)                                          13,884.4163       70.5

Other Principal Stockholders:
Jordan Industries, Inc(7)                                         0.0000       0.0%
Leucadia Investors, Inc.                                      2,019.7802      10.3%
JII Partners Limited Partnership(8)                           1,500.0000       7.6
</TABLE>

(1)     Calculated pursuant to Rule 13d-3(d) under the Exchange Act.
  Under  Rule 13d-3(d), shares not outstanding which are subject  to
  options,  warrants,  rights or conversion  privileges  exercisable
  within  60  days  are  deemed  outstanding  for  the  purpose   of
  calculating  the number and percentage owned by such  person,  but
  not   deemed  outstanding  for  the  purpose  of  calculating  the
  percentage  owned by each other person listed.  As  of  March  13,
  2000,  there  were 19,700 shares of common stock of Parent  issued
  and outstanding.
(2)     Does  not include shares of common stock of Parent owned  by
  JII   Partners   Limited  Partnership  as  to  which   the   named
  individuals disclaim beneficial ownership.
(3)     Includes 0.1650 shares held personally and 7,136.7159 shares
  held  by  the John W. Jordan II Revocable Trust.  Does not include
  51.025  shares  held by Daly Jordan O'Brien,  the  sister  of  Mr.
  Jordan.  51.025  shares  held  by Elizabeth  O'Brien  Jordan,  the
  mother  of  Mr. Jordan or 51.025 shares held by George C.  Jordan,
  Jr., the brother of Mr. Jordan.
(4)     Does not include 16.4973 shares held by the Jordan/Zalaznick
  Capital  Company  or  577.4053 shares held by JZ  Equity  Partners
  PLC,  a  publicly  traded  U.K. investment  trust  advised  by  an
  affiliate  of The Jordan Company (which is controlled  by  Messrs.
  Jordan and Zalaznick).
(5)Does not include 535.8871 shares held by The Jordan Family Trust,
   of  which John W. Jordan II, George C. Jordan, Jr. and G.  Robert
   Fisher are the Trustees.
(6)Does  not include 13.5558 shares held by Bruce H. Zalaznick,  the
   brother of Mr. Zalaznick.
(7)JII owns all of the issued and outstanding junior preferred stock
   of   Parent.   The  junior  preferred  stock  entitles   JII   to
   approximately 82% of the voting power as of the date hereof.  The
   principal  address of JII is ArborLake Centre,  Suite  550,  1751
   Lake Cook Road, Deerfield, IL 60015.
(8)JII  Partners  Limited  Partnership is an investment  partnership
   whose partners include certain officers and employees of JII  and
   its  affiliates.   The  principal  address  of  JI  Partners   is
   ArborLake  Centre, Suite 550, 1751 Lake Cook Road, Deerfield,  IL
   60015.


<PAGE>

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   Services Agreements.  The Company and each of its subsidiaries are
parties   to   an   advisory  agreement  (the  "Subsidiary   Advisory
Agreement")  with  JII,  pursuant  to  which  the  Company  and   its
subsidiaries will pay JII (i) investment banking and sponsorship fees
of  up to 2.0% of the purchase price of acquisitions, joint ventures,
minority  investments  or  sales  involving  the  Company   and   its
subsidiaries or their respective businesses or properties (which were
$0  in 1999); (ii) financial advisory fees of up to 1.0% of any debt,
equity  or  other financing or refinancing involving the  Company  or
such  subsidiary, in each case, arranged with the assistance  of  The
Jordan  Company or its affiliates (which were $0 in 1999); and  (iii)
reimbursement  for The Jordan Company's or JII's out-of-pocket  costs
in  connection with providing such services (which were $0 in  1999).
The  Subsidiary Advisory Agreement expires in December 2007,  but  is
automatically  renewed for successive one-year terms,  unless  either
party  provides written notice of termination 60 days  prior  to  the
scheduled  renewal  date.   Mssrs.  Jordan,  Boucher  and  Zalaznick,
directors of the Company, are partners of The Jordan Company.

   The  Company  and  each  of  its subsidiaries  are  parties  to  a
management   consulting   agreement   (the   "Subsidiary   Consulting
Agreement"), pursuant to which they pay JII annual consulting fees of
1.0% of the Company's net sales for such services and are required to
reimburse  JII  for its out-of-pocket costs related to its  services.
The Subsidiary Consulting Agreement expires in December 2007, but  is
automatically  renewed for successive one-year terms,  unless  either
party  provides written notice of termination 60 days  prior  to  the
scheduled  renewal  date.   Pursuant to  the   Subsidiary  Consulting
Agreement, JII (but not JII's affiliates) is obligated to present all
acquisition,  business and investment opportunities  that  relate  to
manufacturing,  assembly, distribution or marketing of  products  and
services  in the motors, gears and motion control industries  to  the
Company,  and  JII  is not permitted to pursue such opportunities  or
present  them to third parties unless the Company determines  not  to
pursue  such  opportunities or consents thereto.  In accordance  with
this  agreement, the Company paid approximately $2.7 million for  the
year ended December 31, 1999.

   The Company and each of its subsidiaries are parties to a services
agreement   (the   "JI  Properties  Services  Agreement")   with   JI
Properties, Inc. ("JI Properties"), a subsidiary of JII, pursuant  to
which  JI  Properties provides certain real estate and other  assets,
transportation and related services to the Company.  Pursuant to  the
JI  Properties  Services Agreement, the Company is  charged  for  its
allocable  portion  of such services based upon  its  usage  of  such
services and its relative revenues, as compared to JII and its  other
subsidiaries.  In accordance with this agreement, such  charges  were
$1.6 million for the year ended December 31, 1999.  The JI Properties
Services  Agreement  expires in December 2007, but  is  automatically
renewed  for successive one-year terms, unless either party  provides
written  notice of termination 60 days prior to the scheduled renewal
date.

   JII allocates its overhead, general and administrative charges and
expense among JII and its subsidiaries, including the Company,  based
on the respective revenues and usage of corporate overhead by JII and
its  subsidiaries.  Under  this agreement,  the  Company's  allocable
portion  of  corporate expenses was $2.2 million for the  year  ended
December 31, 1999.

   The  Company  and JII are parties to a transition  agreement  (the
"Transition  Agreement") pursuant to which JII provides office  space
and certain administrative and accounting services to the Company  to
facilitate the operations of the Company. The Company reimburses  JII
for  services  provided pursuant to the Transition  Agreement  on  an
allocated  cost basis.  The Transition Agreement expires on  December
31,  2000,  but  is  automatically renewed for  successive  one  year
periods  (unless either party provides prior written notice  of  non-
renewal) through 2007.  The Transition Agreement may be terminated by
the Company on 90 days' written notice.


<PAGE>

   Tax  Sharing  Agreement. The Company and each of its subsidiaries
are parties to a Tax Sharing Agreement (the "Tax Sharing Agreement")
among  JII  and  each of its consolidated subsidiaries  for  Federal
income tax purposes. Pursuant to the Tax Sharing Agreement, each  of
the  consolidated  subsidiaries of JII pays to  JII,  on  an  annual
basis, an amount determined by reference to the separate return  tax
liability  of  the  subsidiary  as defined  in  Treasury  Regulation
1.1552-1(a)(2)(ii).  For the year ended December 31, 1999 the income
tax  payments by the Company to JII under the Tax Sharing  Agreement
were  $1.0  million.  These income tax payments reflected a  federal
and  state income tax rate of approximately 39% of each subsidiary's
pre-tax income.

    Upon   redemption  of  the  Junior  Preferred  Stock  or   other
circumstances that cause the Company and its subsidiaries  to  cease
to  be  tax  consolidated subsidiaries of JII, the Company  and  its
subsidiaries will be released from making any further payments under
the  Tax  Sharing Agreement.  While the release will  discharge  the
Company  and its subsidiaries from making future income tax payments
to  JII,  the  Company and its subsidiaries will remain contingently
liable  to  JII  under the Tax Sharing Agreement in respect  of  any
increases  in their separate return tax liability for periods  prior
to  the consummation of the offerings.  The Company is not aware  of
any such liabilities.

   Directors  of the Company, John W. Jordan II, David W.  Zalaznick
and Thomas H. Quinn each have an ownership interest of more than 10%
of the common stock of Jordan Industries.

   Investment in Affiliate.   In November 1998, the Company invested
$5.6 million in Class A Preferred Stock and $1.7 million in Class  B
Preferred  Stock  of JZ International, Ltd.  The  Company  may  make
additional investments in JZ International's Class A Preferred Stock
up   to   approximately  $5.0  million.   JZ  International's  Chief
Executive  Officer  is  David  W. Zalaznick,  and  its  stockholders
include  Messrs. Jordan, Quinn, Zalaznick and Boucher, who  are  the
Company's  directors and stockholders, as well  as  other  partners,
principals  and  associates.  JZ International is  a  merchant  bank
located  in  London, England that is focused on making European  and
other international investments.  The Company is accounting for this
investment under the cost method.  At December 31, 1999 the cost  of
the investment approximates market value.

   Merkle-Korff  Leases. Merkle-Korff leases  some  of  its  plants,
warehouse and offices under a net lease (the "Merkle-Korff  Leases")
from  companies  controlled by John Simms, Sr., Chairman  and  Chief
Executive  Officer  of Merkle-Korff. Rent expenses,  including  real
estate  taxes attributable to the Merkle-Korff Leases,  amounted  to
$1.0  million for the year ended December 31, 1999. The Company  has
agreed  to pay future minimum rental payments under the Merkle-Korff
Leases  amounting  to $0.6 million for the year ended  December  31,
2000.  The  Company  has the right of first  refusal  to  buy  these
facilities from Mr. Simms. See Note 10 to the Company's Consolidated
Financial Statements. The Company believes the terms of the  Merkle-
Korff Leases are comparable to the terms it would obtain from a non-
affiliated party.

  Motion Control Leases.  Motion Control leases substantially all of
its  production  and  office  space under  noncancellable  operating
leases from a limited partnership whose partners include officers of
Motion  Control.  These leases expire in 2007.  Rent  expense  under
the  leases was $0.7 million for the year ended December  31,  1999.
The  Company  believes the terms of the Motion  Control  leases  are
comparable to the terms it would obtain from a non-affiliated party.

   Directors  and Officers Indemnification. The Company  has  entered
into  indemnification agreements with each member  of  the  Company's
Board of Directors and certain executive officers whereby the Company
agreed, subject to certain exceptions, to indemnify and hold harmless
each   director  and  certain  executive  officers  from  liabilities
incurred  as  a  result  of such person's status  as  a  director  or
executive  officer  of  the  Company.  See  Item  10,  Directors  and
Executive Officers - Board of Directors - Indemnification Agreements.
<PAGE>

   Future  Transactions. The Company has adopted a policy to provide
that   all  transactions  between  the  Company  and  its  officers,
directors and other affiliates must (i) be approved by a majority of
the  members  of  the Board of Directors and by a  majority  of  the
disinterested members of the Board of Directors and (ii) be on terms
no  less  favorable  to  the Company than  could  be  obtained  from
unaffiliated third parties.

                               PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K

(a)  Documents filed as part of this report:

(1)  Financial Statements

     Reference is made to the Index to Consolidated Financial
     Statements appearing in Item 8, which Index is incorporated
     herein by reference.

(2)  Financial Statement Schedule

     The following financial statement schedule for the years ended
     December 31, 1999, 1998 and 1997 is submitted herewith:

            Item                                         Page Number
            ----                                         -----------

  Schedule II - Valuation and qualifying accounts              50

     All other schedules for which provision is made is in the
     applicable accounting regulations of the Securities and Exchange
     Commission are not required under the related instructions, are
     not applicable and therefore have been omitted, or the
     information has been included in the consolidated financial
     statements or is considered immaterial.

(3)  Exhibits

     An index to the exhibits required to be listed under this Item
     14(a)(3) follows the "Signatures" section hereof and is
     incorporated herein by reference.

(a)  Reports on Form 8-K

     Not Applicable.


<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.

                                  MOTORS AND GEARS, INC.


                                  By  /s/ Thomas H. Quinn
                                     Thomas H. Quinn
Dated:  March 13, 2000               Chairman of the Board


  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 dates
indicated.

                                  By  /s/ Thomas H. Quinn
                                     Thomas H. Quinn
Dated:  March 13, 2000               Chairman of the Board


                                  By  /s/ Ron A. Sansom
                                     Ron A. Sansom
Dated:  March 13, 2000               Director


                                  By  /s/ John W. Jordan II
                                     John W. Jordan II
Dated:  March 13, 2000               Director


                                  By  /s/ David W. Zalaznick
                                     David W. Zalaznick
Dated:  March 13, 2000               Director


                                  By  /s/ Jonathan F. Boucher
                                     Jonathan F. Boucher
Dated:  March 13, 2000               Director


                                  By  /s/ John D. Simms, Sr.
                                     John D. Simms, Sr.
Dated:  March 13, 2000               Director


                                  By  /s/ Norman R. Bates
                                      Norman R. Bates
Dated:  March 13, 2000                Chief Financial Officer




<PAGE>

                         EXHIBIT INDEX


Exhibit
Number                       Description

2.1     Contingent Earnout Agreement, dated as of November 7,
        1996, by and among Motors and Gears, Inc., Motors and
        Gears Industries, Inc., The New Imperial Electric
        Company, The New Scott Motors Company, New Gear
        Research, Inc., The Imperial Electric Company, The
        Scott Motors Company and Gear Research, Inc.
        (incorporated by reference to Exhibit 2.2 to Motors and
        Gears Inc.'s Form S-4 Registration Statement (File No.
        333-19257) (the "1996 S-4")

2.2     Share Purchase Agreement, dated March 2, 1997, by and
        among Motors and Gears Holdings, Inc. and the
        stockholders of FIR Group Holdings Italia, S.r.l.
        (incorporate by reference to exhibit 2.1 to Form 8-K of
        Motors and Gears, Inc., dated March 31, 1998)

2.3     Purchase Agreement, dated November 17, 1997, by and
        among Motion Holdings, Inc. and the shareholders of
        Motion Control Engineering, Inc. (incorporated by
        reference to exhibit 2.2 to Form 8-K of Motors and
        Gears, Inc., dated March 31, 1998)

2.4     Agreement for purchase and sale of stock of Electrical
        Design and Control Company by and among ED&C Holdings,
        Inc. and the shareholders of Electrical Design and
        Control Company, (incorporated by reference to exhibit
        2.3 to Form 8-K of Motors and Gears, Inc., dated March
        31, 1998)
2.5     Share Purchase Agreement, dated April 9, 1998, for the
        direct and indirect sale of all the shares of Advanced
        DC (incorporated by reference to exhibit 99.1 to Form 8-
        K of Motors and Gears, Inc., dated January 28, 1999)

2.6     Amendment No. 1 to Agreement for Purchase and Sale of
        Stock, dated May 15, 1998, for the direct and indirect
        sale of all the shares of Advanced DC (incorporated by
        reference to exhibit 99.2 to Form 8-K of Motors and
        Gears, Inc., dated January 28, 1999)

3.1     Restated Certificate of Incorporation of Motors and
        Gears, Inc. (incorporated by reference to Exhibit 3.1
        to Motors and Gears Inc.'s Form S-4 Registration
        Statement (File No. 333-44057)  (the "1998 Form S-4" )

3.2     Bylaws of Motors and Gears, Inc. (incorporated by
        reference to Exhibit 3.2 to the 1996 S-4)

4.1     Indenture, dated November 7, 1996, between Motors and
        Gears, Inc. and Fleet National Bank (incorporated by
        reference to Exhibit 4.1 to the 1996 S-4)

4.2     First Supplemental Indenture, dated December 17, 1997,
        between Motors and Gears, Inc. and State Street Bank
        and Trust Company, as Trustee (incorporated by
        reference to Exhibit 4.2 to the 1998 Form S-4 )
<PAGE>


4.3     Indenture, dated December 17, 1997, between Motors and
        Gears, Inc. and State Street Bank and Trust Company, as
        Trustee (incorporated by reference to Exhibit 4.3 to
        the 1998 Form S-4 )

10.1    Credit Agreement, dated November 7, 1996 by and among
        Motors and Gears Industries, Inc., the lenders listed
        thereto and Bankers Trust Company, as Agent
        (incorporated by reference to Exhibit 4.5 to the 1996
        S-4)

10.2    Amendment No. 1 to Credit Agreement, dated June 3,
        1997, by and among Motors and Gears Industries, Inc.,
        the lenders listed thereto and Bankers Trust Company,
        as Agent (incorporated by reference to Exhibit 10.2 to
        the 1998 Form S-4)

10.3    Amendment No. 2 to Credit Agreement, dated October 27,
        1997, by and among Motors and Gears Industries, Inc.,
        the lenders listed thereto and Bankers Trust Company,
        as Agent (incorporated by reference to Exhibit 10.3 to
        the 1998 Form S-4)

10.4    Amendment No. 3 to Credit Agreement, dated November 21,
        1997, by and among Motors and Gears Industries, Inc.,
        the lenders listed thereto and Bankers Trust Company,
        as Agent (incorporated by reference to Exhibit 10.4 to
        the 1998 Form S-4)

10.5    Tax Sharing Agreement, dated June 28, 1994, by and
        among Jordan Industries, Inc. and each other
        corporation which is a signatory thereto (incorporated
        by reference to Exhibit 10.3 to the 1996 S-4)

10.6    Management Consulting Agreement, dated November 7,
        1996, by and among Motors and Gears, Inc. and TJC
        Management Corporation and the other signatories
        thereto (incorporated by reference to Exhibit 10.5 to
        the 1996 S-4)

10.7    Properties Services Agreement, dated July 25, 1997, by
        and among JI Properties, Inc., Jordan Industries, Inc.
        and the other signatories thereto (incorporated by
        reference to Exhibit 10.7 to the 1998 Form S-4 )

10.8    Transition Agreement, dated July 25, 1997, by and
        between Motors and Gears Holdings, Inc. and Jordan
        Industries, Inc. (incorporated by reference to Exhibit
        10.8 to the 1998 Form S-4 )

10.9    New Subsidiary Advisory Agreement, dated July 25, 1997,
        by and among Motors and Gears Holdings, Inc., Jordan
        Industries, Inc. and the other signatories thereto
        (incorporated by reference to Exhibit 10.9 to the 1998
        Form S-4 )

10.10   New Subsidiary Consulting Agreement, dated July 25,
        1997, by and among Motors and Gears Holdings, Inc.,
        Jordan Industries, Inc. and the other signatories
        thereto (incorporated by reference to Exhibit 10.10 to
        the 1998 Form S-4 )

10.11   Indemnification Agreement, dated November 7, 1996,
        between Motors and Gears, Inc. and Thomas H. Quinn
        (incorporated by reference to Exhibit 10.1(a) to the
        1996 S-4)
<PAGE>


10.12   Indemnification Agreement, dated November 7, 1996,
        between Motors and Gears, Inc. and Jonathan F. Boucher
        (incorporated by reference to Exhibit 10.1(b) to the
        1996 S-4)

10.13   Indemnification Agreement, dated November 7, 1996,
        between Motors and Gears, Inc. and David W. Zalaznick
        (incorporated by reference to Exhibit 10.1(c) to the
        1996 S-4)

10.14
        Indemnification Agreement, dated November 7, 1996,
        between Motors and Gears, Inc. and John W. Jordan II
        (incorporated by reference to Exhibit 10.1(d) to the
        1996 S-4)

10.15   Indemnification Agreement, dated November 7, 1996,
        between Motors and Gears, Inc. and Ron A. Sansom
        (incorporated by reference to Exhibit 10.1(e) to the
        1996 S-4)

10.16   Merkle-Korff Industries, Inc. Non-negotiable
        Subordinated Note in the principal aggregate amount of
        $5,000,000 payable to John D. Simms Revocable Trust
        Under Agreement (incorporated by reference to Exhibit
        10.9 to the 1996 S-4)

10.17   Electrical Design and Control Company, Inc.
        Non-negotiable Subordinated Note in the principal
        aggregate amount of $1,333,333 payable to Tina Lavire
        (incorporated by reference to Exhibit 10.13 to the 1998
        Form S-4 )

10.18   Electrical Design and Control Company, Inc.
        Non-negotiable Subordinated Note in the principal
        aggregate amount of $1,333,333 payable to Marta Monson
        (incorporated by reference to Exhibit 10.14 to the 1998
        Form S-4 )

10.19   Electrical Design and Control Company, Inc.
        Non-negotiable Subordinated Note in the principal
        aggregate amount of $1,333,334 payable to Eric Monson
        (incorporated by reference to Exhibit 10.15 to the 1998
        Form S-4 )

10.20   Industrial Building Leases, each dated as of September
        22, 1996, by and between Merkle-Korff Industries, Inc.
        and the signatory thereto (incorporated by reference to
        Exhibits 10.16-10.19 to the 1996 S-4)

10.21   Employment and Non Competition Agreement, dated as of
        September 22, 1995, by and between Merkle-Korff
        Industries, Inc. and John D. Simms (incorporated by
        reference to Exhibit 10.20 to the 1996 S-4)

10.22   Employment and Non Competition Agreement, dated as of
        September 22, 1995, by and between Merkle-Korff
        Industries, Inc. and John W. Brown (incorporated by
        reference to Exhibit 10.21 to the 1996 S-4)
12.1    Computations of the Ratios of Earnings to Fixed Charges

21.1    Subsidiaries of Motors and Gears, Inc.

27.1    Financial Data Schedule




<PAGE>
<TABLE>
<CAPTION>



                                                                                                               SCHEDULE II
                                                      MOTORS AND GEARS, INC.
                                                 VALUATION AND QUALIFYING ACCOUNTS
                                                      (dollars in thousands)


                                                                   Additions
                             Balance at      Additions due to     Charged to        Write Offs                   Balance at
                            Beginning of       acquisitions        Costs and          Net of                   end of Period
                               Period                              Expenses         Recoveries       Other
                           ---------------  ------------------- ----------------  ---------------  ----------- ---------------

<S>                            <C>                <C>                <C>             <C>             <C>          <C>
December 31, 1999:
  Allowance for
  doubtful accounts               $734                0                784              (592)         (76)         $850

  Reserve for
  Obsolescence                    $761                0                902              (415)         (37)         $1,211

  Warranty reserve                $312                0                209               (34)           0          $487



December 31, 1998:
  Allowance for
  doubtful accounts               $529               67              1,116            (1,001)          23          $734

  Reserve for
  Obsolescence                    $ 46              258                417              (226)         266          $761

  Warranty reserve                $105               37                170                 0            0          $312



December 31, 1997:
   Allowance for
doubtful accounts                 $ 59              406                214              (145)          (5)           $529

   Reserve for
   obsolescence                   $184                0                 75              (213)           0            $ 46

   Warranty Reserve               $  0              105                  0                 0            0            $105
</TABLE>