SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal year ended December 31, 1997, or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
and Exchange Act of 1934

For the transition period from ______ to ______

Commission file number 0-23802
MOTIVEPOWER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Delaware 82-0461010
- ---------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)

1200 Reedsdale Street, Pittsburgh, PA 15233
- ------------------------------------- ----------
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (412) 237-2250
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Class
- ----------------------------
Common stock, $.01 par value

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----

The aggregate market value of the voting stock held by nonaffiliates of the
registrant at March 2, 1998 was: $483,610,666

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class Outstanding at March 2, 1998
- ---------------------------- ----------------------------
Common stock, $.01 par value 17,786,343

DOCUMENTS INCORPORATED BY REFERENCE:

Certain sections or portions of, the Annual Report to Shareholders for the year
ended December 31, 1997, described in Part I and Part III hereof, is
incorporated by reference, and certain sections or portions of the registrant's
proxy statement for the annual meeting of stockholders to be held on April 29,
1998, described in Part III hereof, are incorporated by reference in this
report.

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MOTIVEPOWER INDUSTRIES, INC.

Index to
Annual Report on Form 10-K

For The Year Ended December 31, 1997

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 Holders 9

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 9
Item 6. Selected Consolidated Financial Data 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
Item 8. Consolidated Financial Statements and Supplementary Data 10
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 10

PART III

Item 10. Directors and Executive Officers of the Registrant 10
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 11

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 11

Signatures 17

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PART I

Unless otherwise indicated or the context otherwise requires, the terms
"Company" and "MotivePower" refer to MotivePower Industries, Inc. and its
subsidiaries.

ITEM 1. BUSINESS

THE COMPANY

The Company is a leader in the manufacturing and distribution of products for
rail and other power-related industries, and also provides a variety of related
contract services. On April 26, 1994, the Company, then a wholly-owned
subsidiary of Morrison Knudsen, commenced an initial public offering of 6
million shares of its Common Stock at an offering price of $16 a share which
decreased Morrison Knudsen's interest in the Company to 65%. Effective as of
September 11, 1996, as part of its bankruptcy plan, Morrison Knudsen distributed
all of its ownership in the Company to its creditors and certain of its then
current stockholders. Morrison Knudsen is no longer a stockholder in the
Company. In January 1997, the Company changed its name from MK Rail Corporation
to MotivePower Industries, Inc., and in August 1997 its stock was listed on the
New York Stock Exchange under the symbol "MPO." The Company provides products
and services to freight and passenger railroads, including every Class I
Railroad in North America, commuter rail and transit authorities, original
equipment manufacturers and other customers internationally. The Company has
headquarters in Pittsburgh, Pa., and 2,351 employees at December 31, 1997 at
strategically located facilities in the United States and Mexico.

FORWARD-LOOKING STATEMENTS

Statements in this Form 10-K regarding the Company's efforts to maximize
stockholder value or its efforts to improve operations by increasing
productivity or efficiency are forward-looking statements. The Company's actual
results could differ materially from the results suggested in any
forward-looking statements. Factors that could cause or contribute to these
material differences include, but are not limited to, the following: a general
decline in the NAFTA economy, which could cause a decrease in rail traffic;
continued consolidation by U.S. railroads, which could cause them to reduce
purchases of goods and services; changes in the Mexican government's railroad
privatization program; a strengthening of the U.S. dollar in targeted foreign
markets; the Company's ability to timely and efficiently complete current and
future expansion and productivity enhancement projects, and implement related
productivity improvement plans; and the Company's ability to maintain current
favorable relations with its labor unions. In making these forward-looking
statements, the Company assumes no obligation to update them or advise of
changes in the assumptions on which they were based.

BUSINESS STRATEGY

The Company's business strategy is to grow and continue to strengthen its core
businesses, including manufacturing and distributing engineered locomotive
components and parts; providing locomotive fleet maintenance; overhauling and
remanufacturing locomotives; and manufacturing environmentally friendly
switcher, commuter and mid-range, DC and AC traction, diesel-electric and
liquefied natural gas locomotives up to 4,000 horsepower. The Company is looking
to expand further into other niche power, marine and industrial markets by
growing the existing business in these markets and by modifying certain existing
products to fit new applications.

The Company has outlined a six-part strategy to carry out its growth plan:
1. Capitalize on the railroads' desire to outsource non-transportation functions
such as maintenance and repair projects by continuing to improve quality and by
reducing product cycle times; 2. Continue to grow its Mexican operations by
expanding current capabilities and by pursuing new opportunities created by the
Mexican government's railroad privatization program; 3. Expand sales of
components in targeted non-NAFTA markets, such as South America, the Middle East
and the Pacific Rim; 4. Expand sales of similar components into non-rail
markets; 5. Acquire companies that provide products or services that complement
the Company's current capabilities either geographically or technically, or that
expand the Company's current product line; and 6. Develop alliances and joint
ventures with other major rail industry suppliers.

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4

As market conditions, technological developments or other factors change,
the Company will modify its strategy accordingly.

INDUSTRY CONDITIONS AND TRENDS

The Company's operating results are strongly influenced by general economic
conditions and the financial conditions and level of activity of the global
railroad industry. In 1997, favorable conditions generally prevailed in the
NAFTA economy. As a result, U.S. railroads carried a record 1.37 trillion
revenue ton-miles, the main indicator of activity in the industry, up 1 percent
from the prior year. Although there can be no assurance that these conditions
will continue, indications in early 1998 remained favorable as railroad traffic
continued to grow from 1997 levels.

The Company's business is primarily providing parts, components and
services engineered for locomotives, mainly for the more profitable aftermarket.
Currently, the active locomotive fleet in the NAFTA market is about 30,000
units, about equally divided between heavy-haul freight, commuter locomotives
and lower-horsepower, short-haul and terminal locomotives. The Company estimates
that approximately 40% of the locomotive fleet is older than 20 years and is
under 4000 horsepower. Purchases of new heavy-haul locomotives have been at
historical highs in recent years as railroads have been seeking to modernize
their fleets, but the Company believes production capacity for new units is
limited to current levels of about 1,000 per year. As a result, demand for
overhauling of older locomotives and for aftermarket parts has been high as
railroads work equipment harder and look to maximize the efficiency,
availability and productivity of their existing fleets to meet the increased
need for locomotive power. Historically, the components and parts, maintenance
and overhaul segments of the railroad industry, while still subject to the
impact of rail traffic fluctuations, have been more stable and less cyclical
than the new and remanufactured locomotive capital goods segments. The Company
operates in a highly competitive environment, and there can be no assurance that
increased rail traffic or other economically favorable industry conditions will
benefit the Company.

Since the deregulation of the U.S. railroad industry in 1980, freight
railroads have reduced their equipment base and consolidated operations to
reduce operating costs and improve their competitive position compared to
trucking companies, which compete with the railroad industry. Since 1992, the
total locomotive fleet has been growing and getting older, and market share has
been taken from the trucking industry. The supplier base has been consolidating,
and the Company as a primary consolidator and acquirer, believes it is the
largest locomotive equipment supplier of its type and class in the world.
Railroads have been consolidating and merging, hoping to achieve additional
operating and financial efficiencies that will allow them to compete more
effectively with other modes of transportation. Management believes these
consolidations offer the Company opportunities to increase business with the
surviving railroads as these railroads seek operating efficiencies through such
means as outsourcing locomotive fleet maintenance and components repair. This is
a forward-looking statement, and there can be no assurances that continued
consolidation will not adversely impact the Company through concentration of
bargaining power over prices or rationalization of locomotive fleet sizes.

DESCRIPTION OF BUSINESS OPERATIONS

The Company operates principally through two business units, the Components
Group and the Locomotive Group.

COMPONENTS GROUP

The Components Group manufactures and distributes primarily aftermarket, or
replacement, new and remanufactured components and parts for freight and
passenger railroads, including every Class I Railroad in North America,
metropolitan transit and commuter rail authorities, original equipment
manufacturers and other customers internationally. MotivePower provides most
aftermarket components for locomotives manufactured by the Electro-Motive
Division of General Motors Corporation ("EMD") and certain components for
locomotives made by the GE Transportation Systems unit of General Electric
Company ("GE"). MotivePower believes it is the leading independent supplier in
North America of aftermarket locomotive components such as traction motors,
generators, alternators, turbochargers, cooling systems, gearing and overhauled
diesel engines.

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5

Demand for components is influenced by rail traffic activity. As traffic
increases, the railroads seek to maximize locomotive availability and capacity,
which can increase the frequency of necessary repairs and maintenance. This
business is highly competitive, as the Company faces competition from EMD, GE
and numerous smaller, independent manufacturers and distributors. EMD and GE
accounted for virtually 100% of the new high-horsepower locomotives delivered in
the United States in the past five years and, as original equipment
manufacturers, are the principal suppliers of original parts for their
locomotives.

LOCOMOTIVE GROUP

The Locomotive Group provides fleet maintenance, overhauling and
remanufacturing, and manufacturing of environmentally friendly switcher,
commuter and mid-range, DC and AC traction, diesel-electric and liquefied
natural gas locomotives up to 4,000 horsepower. The Company's fleet maintenance
business unit provides locomotive maintenance under long-term contracts. These
contracts generally cover normal, expected maintenance costs but also allow the
Company to bill additional amounts to cover extraordinary maintenance. The
Company believes it accounts for virtually 100% of the production of low to
mid-range up to 4,000 horsepower locomotives produced in NAFTA.

Demand for fleet maintenance services is driven by the railroads' focus on
cost reduction and productivity improvements as the industry has consolidated
over recent decades, and as railroads consider outsourcing non-transportation
functions. While most railroads have their own mechanical and maintenance
facilities, some achieve cost savings and productivity improvements by
outsourcing the work to an independent servicer. In this business segment, the
Company competes against GE, EMD and the captive in-house repair shops of
certain railroads. When possible, the Company supplies its own component parts,
at market prices, for use in overhaul and maintenance under these contracts. In
this manner, the locomotive fleet maintenance contracts provide additional
opportunities for sales of component parts.

There are approximately 6,000 low-horsepower locomotives operating in
switcher/short-haul service in the United States and Canada, with an average age
of 30 years. Demand for new low-horsepower locomotives has been minimal since
the early 1980s because the railroads have focused instead on modernizing,
rationalizing and downsizing their higher-horsepower freight locomotive fleets.
In addition, older freight locomotives are sometimes used as switchers. As a
result of this low level of demand, the Company believes it is the only
manufacturer of new lower-horsepower locomotives. In 1996, the Company sold 32
switchers to two terminal railroads in Houston. In 1997, it manufactured 3 units
for a demonstrator program and allowed potential customers to "test drive" these
state-of-the-art locomotives. These demonstrators have received favorable
reviews from potential customers, but, to date, the Company has not sold any
additional low-horsepower units. The Company does, however, have a number of
proposals outstanding, but there can be no assurance that it will be successful.

On March 3, 1998, the Company and the Electro-Motive Division of General
Motors formed a strategic alliance to design, manufacture, and market
low-horsepower, switching and branchline locomotives in the United States,
Canada and Mexico. MotivePower Industries is the third-largest manufacturer of
locomotives in NAFTA. Under a marketing and supply agreement, Boise Locomotive,
a subsidiary of the Company, will be the exclusive manufacturer of
Electro-Motive's private band, 1,500- and 2,000-horsepower locomotives for the
NAFTA market.

The Company has been providing overhauling and remanufacturing services to
the railroad industry since 1972, and management believes the Company is the
largest, independent remanufacturer of locomotives in North America. In this
business segment, the Company faces competition from VMV, AMF Canada, GEC
Alsthom Mexico, numerous smaller regional remanufacturers, the captive in-house
shops of Class I railroads, and from GE and EMD. Most large railroads have
in-house capacity to overhaul locomotives but not to remanufacture and
substantially upgrade them.

Typically, a locomotive overhaul includes replacement of various engine and
electrical rotating equipment. The cost can vary greatly depending on the number
and type of options included. Remanufacturing is a more extensive process
involving the disassembly, redesign from the frame up and reassembly of a
locomotive with upgraded equipment to substantially as-new condition.

The Company's overhauling and remanufacturing businesses have been driven
by the aging of the rail industry's locomotive fleet and the historical cost
advantages compared to purchasing new

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locomotives. Between 1970 and 1980, the U.S. industry purchased approximately
12,000 new locomotives, compared to approximately 9,000 since then. As a result,
the average age of the fleet has increased, with nearly 75% of the fleet at
least 10 years old. The typical maintenance cycle calls for a locomotive to be
overhauled after approximately seven years, remanufactured after 15 years and
replaced after 20 to 25 years if it has not been remanufactured.

PRODUCT DEVELOPMENT

In response to new regulations released by the U.S. Environmental Protection
Agency (the "EPA"), the Company has established a new, focused business unit to
explore opportunities that will be created by these new EPA guidelines. Under
the regulations, locomotives will be required to meet reduced nitrous oxide
emission standards, beginning in the year 2001. The standards will be phased in
over several years and may encourage the railroads to overhaul locomotives
before the year 2001 so that those locomotives will qualify under the current,
less-stringent regulations. No assurance can be provided, however, that these
new regulations will have a favorable impact on the Company's results of
operations.

The Company is also involved in the Iron Highway project, a proposed
new system for intermodal transportation. In 1995, the Company manufactured four
Iron Highway trainsets for CSX Intermodal ("CSXI"), a unit of CSX Corporation,
and CP Rail. CP Rail has placed its Iron Highway units in revenue-service
testing, while CSXI has postponed testing of its two units due to its parent
company's acquisition of Conrail and resulting capital constraints. The Company
currently receives no revenues and incurs no costs for the Iron Highway project.
There is no certainty that CP Rail will proceed with the Iron Highway beyond the
testing phase, or that CSXI will resume testing.

BACKLOG

The Company defines backlog as future sales commitments which constitute a
binding agreement between the Company and the customer. Examples include signed
contracts and purchase orders. The Company is the preferred supplier of certain
components to certain customers, having received notice of the customers'
estimate of anticipated purchases. Because these notices are not binding
commitments, the Company does not include these amounts in backlog calculations.
At December 31, 1997 these anticipated purchases totaled $61 million.

The Company's multi-year locomotive fleet maintenance contracts account for
the majority of the Locomotive group backlog. Multi-year fleet maintenance
contracts are expected to continue to produce additional components and parts
sales.

The backlog as of December 31, 1997 and December 31, 1996 and the expected
year of recognition is as follows:

As of December 31, 1997 (Amounts in 000's)

1998 OTHER YEARS ORDER BACKLOG
---- ----------- -------------

Components $ 36,135 $ -- $ 36,135

Locomotive $136,772 $364,948 $501,720
--------
Total $537,855
========

As of December 31, 1996 (Amounts in 000's)

1997 OTHER YEARS ORDER BACKLOG
---- ----------- -------------

Components $ 28,431 $ -- $ 28,431

Locomotive $102,038 $395,650 $497,688
--------
Total $526,119
========

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EMPLOYEES

At December 31, 1997, MotivePower had 2,351 employees versus 2,108 in 1996. This
included 265 salaried employees and 1,449 hourly employees in the United States,
and 162 salaried employees and 475 hourly employees in Mexico. Of the hourly
employees in the United States, 360 at Boise Locomotive Company ("Boise
Locomotive") are represented by the International Union of Operating Engineers
("Operating Engineers"), and 605 at Motor Coils Manufacturing Co. ("Motor
Coils") are represented by the International Union of Electronic, Electrical,
Salaried, Machine and Furniture Workers ("Electrical Workers"). The collective
bargaining agreement with the Operating Engineers expires in June 2000 and the
three collective bargaining agreements with the Electrical Workers, covering
Motor Coils' employees in Braddock and Emporium, Pennsylvania, and St. Louis,
Missouri, expire in August 1998, October 1998 and June 2000, respectively. The
Company considers its relations with its employees and union representation to
be good but cannot, however, assure that contract negotiations will be favorable
to the Company.

ENVIRONMENTAL MATTERS

Information regarding environmental matters is set forth on pages 38 through 40
of the Annual Report to Shareholders for the year ended December 31, 1997, and
such information is incorporated herein by reference.

MAJOR CUSTOMERS

Information regarding major customers is set forth on page 42 of the Annual
Report to Shareholders for the year ended December 31, 1997, and such
information is incorporated herein by reference.

On March 2, 1998, MPI Noreste S.A. de C.V. ("MPI de Mexico"), a subsidiary
of the Company, signed a new, 17-year contract in Mexico, valued at $419
million. The new agreement replaces a previous contract that had six years and
approximately $177 million in revenues remaining.

Under the new contract with Transportation Ferroviaria Mexicana ("TFM"),
MPI de Mexico will overhaul and maintain 319 locomotives at its San Luis Potosi
Facility in the Northeast region of Mexico. A joint venture of Transportacion
Maritima Mexicana S.A. de C.V. and Kansas City Southern Industries Inc., TFM was
awarded a 50-year concession to operate the Northeast region of the National
Railways of Mexico as part of the Mexican government's program to privatize the
rail system.

FOREIGN AND DOMESTIC OPERATIONS

Information regarding foreign and domestic operations is set forth on page 42 of
the Annual Report to Shareholders for the year ended December 31, 1997 and such
information is incorporated herein by reference.

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ITEM 2. PROPERTIES

The Company's headquarters are located in Pittsburgh, Pennsylvania and its
manufacturing facilities are located in the United States and Mexico. The
Company considers that its properties are generally in good condition, are
well-maintained, and are generally suitable and adequate to carry on its
business except as noted below. The principal facilities of the Company and its
subsidiaries or operating units are as follows:

Square Owned/
Location Footage Leased Use
- -------- ------- ------ ---

MOTIVEPOWER INDUSTRIES, INC.
Pittsburgh, Pennsylvania 8,400 Leased Corporate Headquarters

BOISE LOCOMOTIVE CO.
Pittsburgh, Pennsylvania 5,000 Leased Office
Mountaintop, Pennsylvania(1) 204,000 Owned Manufacturing
Boise, Idaho 210,000 Owned Manufacturing
Boise, Idaho 66,900 Owned Manufacturing
Helper, Utah(2) -- Leased Maintenance Shop
Barstow, California(2) -- Leased Maintenance Shop
Houston, Texas(2) -- Leased Maintenance Shop

ENGINE SYSTEMS CO.
Latham, New York 60,000 Owned Manufacturing/Office

MICROPHOR CO.
Willits, California 66,700 Owned Manufacturing/Office

MPI NORESTE, S.A. DE C.V.
San Luis Potosi, Mexico 1,235,700 Leased Manufacturing/Office
San Luis Potosi, Mexico(6) 90,000 Owned Manufacturing
Acambaro, Mexico 132,300 Leased Manufacturing
Mexico City, Mexico 3,700 Leased Office

MOTOR COILS MFG. CO.
Pittsburgh, Pennsylvania(4) 63,000 Leased Office
Pittsburgh, Pennsylvania(4) 57,000 Leased Warehouse
Pittsburgh, Pennsylvania 59,600 Leased Manufacturing
Braddock, Pennsylvania 127,000 Owned Manufacturing/Office
Emporium, Pennsylvania 41,300 Owned Manufacturing
St. Louis, Missouri 62,000 Owned Manufacturing

POWER PARTS CO.
Elk Grove Village, Illinois(3) 150,700 Leased Distribution/Office
Alsip, Illinois 42,600 Owned Manufacturing/Office
Gilman, Illinois 31,800 Leased Manufacturing

TOUCHSTONE CO.
Jackson, Tennessee(5) 88,000 Leased Manufacturing
Jackson, Tennessee(5) 77,200 Leased Warehouse
Jackson, Tennessee(5) 2,600 Leased Warehouse
Jackson, Tennessee(5) 1,500 Leased Office
Jackson, Tennessee(6) 140,000 Owned Manufacturing/Office

(1) The Company closed this facility in the second quarter of 1996 and is
marketing the facility for sale.

(2) Represents unspecified portions of maintenance facilities owned by the
railroads for which the Company provides locomotive fleet maintenance
services. These facilities have been made available to the Company to
perform these services for nominal consideration.

(3) The Company subleases 59,500 sq. ft. of space to a subtenant whose sublease
expires in July, 1998. The Company will not extend the sublease and plans
to utilize the space at the expiration of the sublease.

(4) The Company's Motor Coils subsidiary has commenced a civil action against
M & T Partners and its sole general partners, the former President and
Chief Executive Officer and Executive Vice President of the Company,
seeking rescission of this 15-year leasing agreement and damages arising
from the former officers' breaches of fiduciary duty while in their
capacity with the Company.

(5) The Company is constructing a new 140,000 square foot facility and will
vacate in 1998 all but 16,000 square feet of leased floor space.

(6) Under construction.

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ITEM 3. LEGAL PROCEEDINGS

Information required under Item 3. Legal Proceedings is set forth on pages 40
and 41 of the Annual Report to Shareholders for the year ended December 31, 1997
and such information is incorporated herein by reference.

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

None.

PART II

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

MotivePower's Common Stock traded on the Nasdaq National Market Tier of the
Nasdaq Stock Market under the symbol "MOPO" from April 1994 through August 15,
1997. On August 18, 1997 the Company's common stock began trading on the New
York Stock Exchange ("NYSE") under the symbol "MPO". As of March 2, 1998, the
approximate number of holders of record of its Common Stock was 3,520.

The high and low sales prices for the Company's Common Stock, as reported
in the NYSE/ Nasdaq Stock Market Summary of Activity reports in 1997 and 1996
were as follows:

1997 1996
----------------- ---------------
High Low High Low

First Quarter $11.38 $ 7.75 $4.50 $2.88
Second Quarter 16.13 10.75 6.75 3.38
Third Quarter 27.25 15.25 6.63 5.00
Fourth Quarter 28.88 19.75 8.00 5.88

The Board did not declare dividends for 1997 or 1996. On January 27, 1998,
the Company entered into a new credit facility which does not restrict the
Company's ability to pay dividends so long as, after giving effect to the
payment of dividends, the Company remains in compliance with the financial
covenants and other terms and conditions of borrowing under its credit
agreements. The Board reviews its dividend policy regularly.

At the close of business on March 2, 1998, the Company's Common Stock was
trading at $27.19 per share.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

Information required under Item 6. Selected Consolidated Financial Data is set
forth on page 16 of the Annual Report to Shareholders for the year ended
December 31, 1997 and such information is incorporated herein by reference.

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

Information required under Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations is set forth on pages 17 through
22 of the Annual Report to Shareholders for the year ended December 31, 1997 and
such information is incorporated herein by reference.

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

In the Annual Report to Shareholders for the year ended December 31, 1997, the
consolidated financial statements and notes to the consolidated financial
statements are set forth on pages 23 through 43. Such consolidated financial
statements and related notes are incorporated herein by reference.

PART III

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

None.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors and executive officers of the Company is set
forth under the captions "Election of Directors" and "Information Concerning
Executive Officers" in the Company's proxy statement related to the 1998 annual
meeting of stockholders (the "Proxy Statement") and is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is set forth under the caption "Compensation"
in the Proxy Statement and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is set forth under the caption "Security
Ownership" in the Proxy Statement and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

PART IV

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

(A) DOCUMENTS FILED AS A PART OF THIS REPORT:

(1) and (2) Reference is made to the separate index to the Company's
Consolidated Financial Statements and Financial Statement Schedules as set forth
on page 14 hereof.

(3) The following Exhibits are included as a part of this Annual Report on
Form 10-K or are incorporated herein by reference:

EXHIBIT NO. DOCUMENT DESCRIPTION
- ----------- --------------------

3.01(19) Form of Amended and Restated Certificate Of Incorporation of the Company

3.02(18) Form of Amended and Restated By-Laws of the Company

3.05(9) Certificate of Designations of Series C Junior Participating Preferred Stock

4.01(9) Rights Agreement, dated as of January 19, 1996, between the Company and
Chemical Mellon Shareholder Services, L.L.C.

4.02(9) Form of Right Certificate

4.03(11) Amendment to Rights Agreement dated as of April 5, 1996 between the Company and Chase
Mellon Shareholder Services, L.L.C. (Formerly Chemical Mellon Shareholder Services, L.L.C.)

4.04(13) Second Amendment to Rights Agreement dated as of June 20, 1996 between the
Company and Chase Mellon Shareholder Services, L.L.C.

4.05(19) Third Amendment to Rights Agreement dated as of August 22, 1998 between the Company and Chase
Mellon Shareholder Services L.L.C.

10.16(2) Form of MotivePower Industries , Inc. Stock Incentive Plan

10.18(6) Lease between M & T Partners and Motor Coils Manufacturing Co., dated July 16, 1991, and Amendment
dated January 30, 1995

10.19(1) Lease between Pittsburgh Flatroll Company and Motor Coils Manufacturing Company, dated
March 1, 1991

10.20(6) Lease between MotivePower Industries, Inc. and SCI North Carolina Limited Partnership dated
May 17, 1995

10.21(6) Lease between MotivePower Industries, Inc. and M & T Partners effective April 1, 1994

10.31(19) Amended and Restated MotivePower Industries, Inc. Deferred Compensation Plan

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10.44(10) Employment Agreement between Company and John C. Pope dated as of December 29, 1995

10.53(17) Note Cancellation and Restructuring Agreement dated as of June 20, 1996, by and among
MK Rail Corporation, Morrisson Knudsen Corporation, a Delaware corporation, and Morrison
Knudsen Corporation, an Ohio Corporation

10.54(17) Stockholders Agreement dated as of June 20, 1996 between MK Rail Corporation and Morrison
Knudsen Corporation

10.55(17) Agreement for the Purchase and sale of Assets dated June 27, 1996 by and among
MK Rail Corporation, Alert Manufacturing & Supply Co. and All-State Industrial Rubber Co., Inc.

10.56(15) Closing Agreement dated July 29, 1996 among the Company, Alert Manufacturing & Supply Co.
and All-State Industrial Rubber Co., Inc.

10.57(16) Asset Purchase Agreement dated October 15, 1996 among Power Parts Sign Company and RI-DEL MFG. INC.

10.60(18) Form of Employment Agreement and Exhibits thereto, dated July 1, 1996 between
MotivePower Industries, Inc. and Michael A. Wolf

10.63(19) Amended Employment Agreement between the Company and John C. Pope dated as of December 9, 1997

10.64(19) Amended Employment Agreement between the Company and Michael A. Wolf dated as of February 9, 1997

21.01(19) Subsidiaries of the Company

23.01(19) Independent Auditors' Consent

27.01(19) Article 5 Financial Data Schedule for the Year Ended December 31, 1997

99.01(2) Form of MotivePower Industries, Inc. Executive Incentive Plan

99.02(2) Form of MotivePower Industries, Inc. Stock Option Plan for Non-Employee Directors

99.03(19) Certain sections or portions of the Annual Report to Shareholders for the year ended December 31, 1997

----------
1. Incorporated by reference to the Company's Registration
Statement on Form S-1 filed with the Commission on February 24,
1994.

2. Incorporated by reference to Amendment No. 1 to the Company's
Registration Statement on Form S-1 filed with the Commission on
March 29, 1994.

3. Not utilized.

4. Not utilized.

5. Not utilized

6. Incorporated by reference to the Company's Annual Report on Form
10-K for the Year ended December 31, 1994.

7. Not utilized.

8. Not utilized.

9. Incorporated by reference to the Company's Report on Form 8-K filed
with the Commission on January 31, 1996.

10. Incorporated by reference to the Company's Annual Report on Form
10-K for the Year ended December 31, 1995.

11. Incorporated by reference to the Company's Amendment No. 1 on Form
8-A/A filed with the Commission on April 25, 1996.

12. Not utilized.

13. Incorporated by reference to the Company's Amendment No. 2 on Form
8-A/A filed with the Commission on July 3, 1996.

14. Not utilized.

15. Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the Quarter ended June 30, 1996.

16. Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the Quarter ended September 30, 1996.

17. Incorporated by reference to the Company's Current Report on Form
8-K filed with the Commission on July 3, 1996.

12
13

18. Incorporated by reference to the Company's Annual Report on Form
10-K for the year ended December 31, 1996.

19. Filed herewith.

(B) REPORTS ON FORM 8-K

No reports on Form 8-K were filed by the Company during the quarter ended
December 31, 1997.

MOTIVEPOWER INDUSTRIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

PAGE(S) IN
ANNUAL REPORT*
--------------

The following documents are filed as part of this report:

(1) Consolidated Financial Statements:
Consolidated Statements of Operations for each of the years in the
three year period ended December 31, 1997 23
Consolidated Balance Sheets at December 31, 1997, and 1996 24
Consolidated Statements of Cash Flows for each of the years in the
three year period ended December 31, 1997 25-26
Consolidated Statements of Changes in Stockholders' Equity for
each of the years in the three year period ended December 31, 1997 27
Notes to Consolidated Financial Statements 28-43
Independent Auditor's Report 22

* Incorporated by reference from the indicated pages of the
MotivePower Industries, Inc. 1997 Annual Report to Shareholders

(2) Financial Statement Schedules:
Independent Auditors' Report on Financial Statement Schedule 15
For each of the years in the three year period ended December 31, 1997
Schedule II - Valuation and Qualifying Accounts 16

All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.

14
15

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Board of Directors of
MotivePower Industries, Inc.:

We have audited the consolidated financial statements of MotivePower Industries,
Inc. and subsidiaries as of December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997, and have issued our report
thereon dated February 4, 1998; such financial statements and report are
included in your 1997 Annual Report to Stockholders and are incorporated herein
by reference in this Form 10-K. Our audits also included the consolidated
financial statement schedule of MotivePower Industries, Inc., listed in Item 14.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
February 4, 1998

15
16

Schedule II

MOTIVEPOWER INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

Additions -
Balance at Additions - Charged to
beginning Charged to other Balance at
of costs and accounts end of
period expenses - describe Deductions period
------ -------- ---------- ---------- ------

YEAR ENDED DECEMBER 31, 1997
Loss reserves $12,121 $ 1,027 $ -- $ (1,295) $11,853
Warranty and overhaul reserves 7,053 4,188 -- (2,619) 8,622
Inventory reserves 3,546 1,771 -- (3,155) 2,162
Allowance for doubtful accounts 284 374 -- (264) 394
Valuation allowance - taxes 19,278 -- -- (2,074) 17,204
Environmental reserves 4,078 18 -- -- 4,096

YEAR ENDED DECEMBER 31, 1996
Loss reserves $15,176 $ 2,841 $ $ (5,896) $12,121
Warranty and overhaul reserves 4,402 5,450 -- (2,799) 7,053
Inventory reserves 13,028 4,072 -- (13,554) 3,546
Allowance for doubtful accounts 531 97 -- (344) 284
Valuation allowance - taxes 22,375 -- -- (3,097) 19,278
Environmental reserves 4,060 18 -- -- 4,078

YEAR ENDED DECEMBER 31, 1995
Loss reserves $14,903 $10,458 $ $(10,185) $15,176
Warranty and overhaul reserves 5,434 6,370 -- (7,402) 4,402
Inventory reserves 865 12,263 -- (100) 13,028
Allowance for doubtful accounts 205 450 -- (124) 531
Valuation allowance - taxes 20,219 2,156 -- -- 22,375
Environmental reserves 2,653 1,451 -- (44) 4,060

16
17

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.

MotivePower Industries, Inc.

By: /s/ Michael A. Wolf
--------------------------------------------------
Michael A. Wolf
President and Chief Executive Officer and Director
(Principal Executive Officer)

March 13, 1998

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.

/s/ John C. Pope Chairman and Director March 13, 1998
- -----------------------------------
John C. Pope

/s/ William F. Fabrizio Senior Vice President March 13, 1998
- ----------------------------------- and Chief Financial Officer
William F. Fabrizio (Principal Financial Officer)

/s/ William D. Grab Vice President, Controller and March 13, 1998
- ----------------------------------- Principal Accounting Officer
William D. Grab

/s/ Gilbert E. Carmichael Vice Chairman and Director March 13, 1998
- -----------------------------------
Gilbert E. Carmichael

/s/ Ernesto Fernandez Hurtado Director March 13, 1998
- -----------------------------------
Ernesto Fernandez Hurtado

/s/ Lee B. Foster II Director March 13, 1998
- -----------------------------------
Lee B. Foster II

/s/ James P. Misco II Director March 13, 1998
- -----------------------------------
James P. Misco II

/s/ Nicholas J. Stanley Director March 13, 1998
- ------------------------------------
Nicholas J. Stanley