UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                    WASHINGTON, D.C.  20549
                               
                           Form 10-Q
                   ________________________
                               
            [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934
                               
                For the quarterly period ended June 30, 1998
                                                _____________               
                              OR
                               
           [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                               
             For the transition period from ______ to ______
                               
                      Commission file number 1-8974
                                             ______
                               
                              AlliedSignal Inc.
         ______________________________________________________________
            (Exact name of registrant as specified in its charter)
                               
                    Delaware                         22-2640650
       _______________________________           _____________________
       (State or other jurisdiction of              (I.R.S. Employer
       incorporation or organization)             Identification No.)

           101 Columbia Road
             P.O. Box 4000
          Morristown, New Jersey                       07962-2497
  ________________________________________            _____________
  (Address of principal executive offices)             (Zip Code)

                            (973)455-2000
          _____________________________________________________
           (Registrant's telephone number, including area code)
                               
                            NOT APPLICABLE
_________________________________________________________________________
     (Former name, former address and former fiscal year,
                 if changed since last report)
                               
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 
                _____                           _____

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

                                                Outstanding at
Class of Common Stock                            June 30,1998
_____________________                         ______________________
     $1 par value                              561,264,881 shares


AlliedSignal Inc. Index _____ Part I. - Financial Information Page No. _____________________ ________ Item 1. Condensed Financial Statements: Consolidated Balance Sheet - June 30, 1998 and December 31, 1997 3 Consolidated Statement of Income - Three and Six Months Ended June 30, 1998 and 1997 4 Consolidated Statement of Cash Flows - Six Months Ended June 30, 1998 and 1997 5 Notes to Financial Statements 6 Report on Review by Independent Accountants 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 Part II. - Other Information _________________ Item 2. Changes in Securities 16 Item 5. Other Information 17 Item 6. Exhibits and Reports on Form 8-K 17 Signatures 19 2

AlliedSignal Inc. Consolidated Balance Sheet (Unaudited) June 30, December 31, 1998 1997 ___________ ____________ (Dollars in millions) ASSETS Current assets: Cash and cash equivalents $ 507 $ 611 Short-term investments 22 430 Accounts and notes receivable 1,809 1,886 Inventories 2,409 2,093 Other current assets 565 553 _____ _____ Total current assets 5,312 5,573 Investments and long-term receivables 526 480 Property, plant and equipment 9,106 9,189 Accumulated depreciation and amortization (4,909) (4,938) Cost in excess of net assets of acquired companies - net 2,881 2,426 Other assets 981 977 ______ ______ Total assets $13,897 $13,707 ======== ======= LIABILITIES Current liabilities: Accounts payable $ 1,386 $ 1,345 Short-term borrowings 84 47 Commercial paper 595 821 Current maturities of long-term debt 185 224 Accrued liabilities 1,668 1,999 _______ ______ Total current liabilities 3,918 4,436 Long-term debt 1,638 1,215 Deferred income taxes 601 694 Postretirement benefit obligations other than pensions 1,760 1,775 Other liabilities 1,157 1,201 SHAREOWNERS' EQUITY Capital - common stock issued 716 716 - additional paid-in capital 2,866 2,425 Common stock held in treasury, at cost (3,108) (2,665) Accumulated other nonowner changes (220) (179) Retained earnings 4,569 4,089 ______ _____ Total shareowners' equity 4,823 4,386 ______ _____ Total liabilities and shareowners' equity $13,897 $13,707 ======= ======= Notes to Financial Statements are an integral part of this statement. 3

AlliedSignal Inc. Consolidated Statement of Income (Unaudited) Three Months Ended Six Months Ended June 30 June 30 __________________ _________________ 1998 1997 1998 1997 ____ ____ ____ ____ (Dollars in millions except per share amounts) Net sales $3,869 $3,578 $7,515 $6,905 ______ ______ ______ ______ Cost of goods sold 2,949 2,764 5,758 5,369 Selling, general and administrative expenses 406 386 804 751 ______ _____ ______ ______ Total costs and expenses 3,355 3,150 6,562 6,120 Income from operations 514 428 953 785 Equity in income of affiliated companies 29 55 63 96 Other income (expense) -- 14 (1) 48 Interest and other financial charges (32) (39) (66) (81) ______ ______ _____ ______ Income before taxes on income 511 458 949 848 Taxes on income 161 153 299 284 _____ _____ _____ ______ Net income $ 350 $ 305 $ 650 $ 564 ======= ======= ====== ====== Earnings per share of common stock - basic $ .62 $ .54 $ 1.15 $ 1.00 ====== ====== ====== ====== Earnings per share of common stock - assuming dilution $ .61 $ .52 $ 1.13 $ .97 ====== ====== ====== ====== Cash dividends per share of common stock $ .15 $ .13 $ .30 $ .26 ====== ====== ====== ====== Notes to Financial Statements are an integral part of this statement. 4

AlliedSignal Inc. Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30 ________________ 1998 1997 ____ ____ (Dollars in millions) Cash flows from operating activities: Net income $ 650 $ 564 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (includes goodwill) 302 305 Undistributed earnings of equity affiliates (4) (22) Deferred income taxes 38 67 Decrease in accounts and notes receivable 96 76 (Increase) in inventories (128) (158) Decrease in other current assets 28 16 Increase in accounts payable 21 6 (Decrease) in accrued liabilities (334) (345) Taxes paid on sales of businesses (165) (5) Other (6) (40) _____ _____ Net cash provided by operating activities 498 464 _____ _____ Cash flows from investing activities: Expenditures for property, plant and equipment (280) (309) Proceeds from disposals of property, plant and equipment 51 16 Decrease in investments and long-term receivables - 17 (Increase) in other investments - (5) Cash paid for acquisitions (316) (382) Proceeds from sales of businesses 202 34 Decrease(increase) in short-term investments 408 (164) _____ _______ Net cash provided by (used for) investing activities 65 (793) _____ _______ Cash flows from financing activities: Net (decrease) increase in commercial paper (226) 192 Net increase (decrease) in short-term borrowings 3 (5) Proceeds from issuance of preferred stock of subsidiary - 112 Proceeds from issuance of common stock 91 101 Proceeds from issuance of long-term debt 413 12 Payments of long-term debt (159) (65) Repurchases of common stock (619) (290) Cash dividends on common stock (170) (148) Other - (45) _____ ______ Net cash (used for) financing activities (667) (136) _____ ______ Net (decrease) in cash and cash equivalents (104) (465) Cash and cash equivalents at beginning of year 611 1,465 _____ _______ Cash and cash equivalents at end of period $ 507 $1,000 ====== ======== Notes to Financial Statements are an integral part of this statement. 5

AlliedSignal Inc. Notes to Financial Statements (Unaudited) (Dollars in millions except per share amounts) Note 1. In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal adjustments, necessary to present fairly the financial position of AlliedSignal Inc. and its consolidated subsidiaries at June 30, 1998 and the results of operations for the three and six months ended June 30, 1998 and 1997 and cash flows for the six months ended June 30, 1998 and 1997. The results of operations for the three- and six-month periods ended June 30, 1998 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 1998. The financial information as of June 30, 1998 should be read in conjunction with the financial statements contained in the Company's Form 10-K Annual Report for 1997. Note 2. Accounts and notes receivable consist of the following: June 30, December 31, 1998 1997 _________ ____________ Trade $1,474 $1,466 Other 367 457 ______ ______ 1,841 1,923 Less-Allowance for doubtful accounts and refunds (32) (37) _______ _______ $1,809 $1,886 ======= ======= Note 3. Inventories consist of the following: June 30, December 31, 1998 1997(a) ________ ____________ Raw materials $ 623 $ 605 Work in process 807 722 Finished products 1,081 905 Supplies and containers 91 89 _______ _______ 2,602 2,321 Less - Progress payments (73) (88) Reduction to LIFO cost basis (120) (140) _______ ________ $2,409 $2,093 ====== ====== (a) Reclassified for comparative purposes. Note 4. Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 - "Reporting Comprehensive Income" (SFAS No. 130), which establishes standards for reporting and display of changes in equity from nonowner sources in the financial statements. Total nonowner changes in shareowners' equity for the six months ended June 30, 1998 and 1997 are $609 and $444 million, respectively, which principally represent net income and foreign currency translation adjustments. 6

Note 5. The details of the earnings per share calculations for the three- and six-month periods ending June 30, 1998 and 1997 follow: Three Months Six Months ___________________ _______________________ Per Per Share Share Income Shares Amount Income Shares Amount 1998 Earnings per share of common stock - basic $350 563.2 $.62 $650 563.7 $1.15 Dilutive securities: Stock options 13.2 13.4 Restricted stock units .7 .7 ____ ____ _____ ____ ____ _____ Earnings per share of common stock - assuming dilution $350 577.1 $.61 $650 577.8 $1.13 ==== ===== ==== ==== ====== ===== 1997 Earnings per share of common stock - basic $305 565.4 $.54 $564 566.2 $1.00 Dilutive securities: Stock options 13.8 14.1 Restricted stock units 1.1 1.1 ___ ____ ___ ____ _____ ____ Earnings per share of common stock - assuming dilution $305 580.3 $.52 $564 581.4 $.97 ==== ===== ==== ==== ===== ==== The diluted earnings per share calculation excludes the effect of stock options when the options' exercise prices exceed the average market price of the common shares during the period. For the three and six-month periods ended June 30, 1998, options for 1.0 million and 1.1 million, respectively, were excluded. Note 6. During the first quarter of 1998, the Company issued $200 million of 6.20% notes due February 1, 2008, and $200 million of 5-3/4% dealer remarketable securities due March 15, 2011. During the second quarter of 1998, the Company made two exchange offers to holders of certain of its outstanding debt securities. In the first such exchange offer, holders of approximately $52 million principal amount of the Company's 9 1/2% Debentures due June 1, 2016 tendered debentures for a like principal amount of the Company's 9.065% Debentures due June 1, 2033. In the second such exchange offer, holders of approximately $79 million principal amount of the Company's 9 7/8% Debentures due June 1, 2002 and approximately $39 million principal amount of the Company's 9.20% Debentures due February 15, 2003 tendered debentures for approximately $133 million principal amount of the Company's 6 1/8% Notes due July 1, 2005. The debt exchange did not result in a substantial modification of the original debt terms. Note 7. During the first quarter of 1998, the Company issued 10.7 million shares of its common stock, valued at approximately $400 million, for acquisitions. 7

Report on Review by Independent Accountants ___________________________________________ To the Board of Directors of AlliedSignal Inc. We have reviewed the accompanying consolidated balance sheet of AlliedSignal Inc. and its subsidiaries as of June 30, 1998, and the consolidated statements of income for the three-month and six-month periods ended June 30, 1998 and 1997 and of cash flows for the six-month periods ended June 30, 1998 and 1997. This financial information is the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial information referred to above for it to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1997, and the related consolidated statements of income, of retained earnings, and of cash flows for the year then ended (not presented herein); and in our report dated January 28, 1998 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet information as of December 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. PricewaterhouseCoopers LLP Florham Park, NJ 07932 August 7, 1998 8

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ______________________________________________ Results of Operations _____________________ Second Quarter 1998 Compared with Second Quarter 1997 _____________________________________________________ Net sales in the second quarter of 1998 were $3.9 billion, an increase of $291 million, or 8%, compared with the second quarter of 1997. Of this increase, $323 million was due to higher sales volume and $312 million was from recent acquisitions, offset in part by a $258 million reduction for disposed businesses, mainly the safety restraints business. Selling prices were lower by $59 million and the impact of foreign exchange reduced sales by $27 million. During the second quarter 1998, the Company began reporting results in five business segments. Aerospace Systems includes Aerospace Equipment Systems (environmental control systems; engine and fuel controls; power systems; aircraft lighting; and aircraft wheels and brakes); Electronic & Avionics Systems (flight safety, communications, navigation, radar and surveillance systems; and advanced systems and instruments); and Aerospace Marketing, Sales & Service (repair and overhaul services; hardware; logistics; and management and technical services). Aerospace Systems sales of $1,204 million in the second quarter of 1998 increased by $237 million, or 25%, compared with the second quarter of 1997. This sales growth reflects strong commercial spares sales and original equipment (OE) sales in power management and generation systems. Strong demand also continued for Electronic & Avionics Systems safety avionics products, particularly for the enhanced ground proximity warning system. The acquisition of Grimes Aerospace (Grimes) lighting systems business in July 1997 and Banner Aerospace (Banner) FAA-certified hardware parts business in January 1998 also contributed to Aerospace Systems higher sales. Specialty Chemicals & Electronic Solutions includes Specialty Chemicals (fluorine-based products; pharmaceutical and agricultural chemicals; specialty waxes, adhesives and sealants; and process technology); and Electronic Materials (insulation materials for integrated circuitry; copper-clad laminates for printed circuit boards; advanced chip packaging; and amorphous metals). Specialty Chemicals & Electronic Solutions sales of $589 million in the second quarter of 1998 increased by $13 million, or 2%, compared with the second quarter of 1997. Sales in Specialty Chemicals were higher primarily reflecting the acquisition of Astor Holdings (Astor) wax business in October 1997, which more than offset a sales decline in Electronic Materials due to soft semiconductor and electronics markets. Turbine Technologies includes Aerospace Engines (auxiliary power units; and propulsion engines); and Turbocharging Systems (turbochargers; charge-air coolers; and portable power systems). Turbine Technologies sales of $921 million in the second quarter of 1998 were $172 million, or 23%, higher compared with the same quarter of 1997. This sales increase reflects higher sales of OE and aftermarket propulsion engines and auxiliary power units. Sales of turbochargers also increased, benefiting from strength in European diesel-powered passenger cars and from growth in the North American diesel truck market. 9

Performance Polymers includes the Polymers unit (fibers; plastics resins; specialty films; and intermediate chemicals). Performance Polymers sales of $531 million in the second quarter of 1998 were $19 million, or 4%, higher compared with the same quarter of 1997. This sales growth resulted from increases in sales of specialty films for pharmaceutical packaging, increased engineering plastics volume in the lawn and power tool segment, and improved sales of higher-margin plastics in Europe. The loss of sales resulting from exiting the European carpet fibers business and a portion of the North American textiles business was a partial offset. Transportation Products includes the Automotive Products Group (car care products including anti-freeze, filters, spark plugs, cleaners, waxes and additives; and friction materials); and Truck Brake Systems (air brake and anti-lock braking systems). Transportation Products sales of $621 million in the second quarter of 1998 were $151 million, or 20%, lower compared with the second quarter of 1997. The decrease primarily reflects the disposition of the safety restraints business. Excluding the disposed safety restraints business, sales were 13% higher. The sales gain reflects the acquisition of the Prestone Products Corporation (Prestone) in June 1997 and the Holt Lloyd Group Ltd. (Holt Lloyd) in November 1997 and higher demand for OE truck brake products, anti-lock truck brake installations and growth in truck brake aftermarket products. Cost of goods sold as a percent of net sales decreased from 77.2% in the second quarter of 1997 to 76.2% in the second quarter of 1998 reflecting in part results of the Company's continuing Six Sigma programs to improve productivity and lower manufacturing and materials costs. Income from operations of $514 million in the second quarter of 1998 increased by $86 million, or 20%, compared with the second quarter of 1997. On a segment basis, Aerospace Systems income from operations increased by 49%, Specialty Chemicals & Electronic Solutions increased by 14%, Turbine Technologies increased by 5% and Performance Polymers increased by 39%. Income from operations for Transportation Products decreased by 39%. Excluding the divested safety restraints business, Transportation Products income from operations decreased by 20%. The Company's operating margin for the second quarter of 1998 was 13.3%, compared with 12.0% for the same period last year. See the discussion of net income below for information by segment. Productivity (the constant dollar basis relationship of sales to costs) improved by 5.5% compared with the second quarter of 1997 primarily reflecting ongoing Six Sigma initiatives to lower materials and manufacturing costs. Equity in income of affiliated companies of $29 million in the second quarter of 1998 represents a decrease of $26 million, or 47%, compared with the same quarter of 1997, primarily due to lower earnings from the UOP process technology joint venture (UOP). Other income (expense) decreased by $14 million, compared with the same quarter of 1997, reflecting lower interest income primarily due to a lower cash position because of spending for acquisitions and repurchases of the Company's common stock. 10

Interest and other financial charges of $32 million in the second quarter of 1998 decreased by $7 million, or 18%, compared with the second quarter of 1997. This decrease results from lower tax interest expense due to an acceleration of worldwide tax audits resulting in developments favorable to the Company's position, offset in part by higher debt-related interest expense reflecting increased levels of debt. The effective tax rate in the second quarter of 1998 was 31.5%, compared with 33.5% in the second quarter of 1997, primarily due to tax benefits on exports, an increase in energy tax credits and other tax planning strategies. Net income of $350 million, or $0.61 per share, in the second quarter of 1998 was 15% higher than net income of $305 million, or $0.52 per share, in the second quarter of 1997. All earnings per share data in Management's Discussion and Analysis reflect diluted earnings per share. Aerospace Systems net income of $123 million in the second quarter of 1998 improved by $42 million, or 52%, compared with the same quarter of 1997. Net income growth results primarily from strong demand for higher-margin new safety and communications products and improved avionics factory performance. The acquisition of Grimes also contributed to higher net income for Aerospace Systems. Specialty Chemicals & Electronic Solutions net income of $82 million in the second quarter of 1998 decreased by $18 million, or 18%, compared with the second quarter of 1997. This decline in net income was driven by a lower contribution by UOP. Turbine Technologies net income of $63 million in the second quarter of 1998 increased by $9 million, or 17%, compared with the second quarter of 1997. This increase in net income results from higher sales and factory productivity improvements which were somewhat offset by engineering and development costs in two new product lines. Performance Polymers net income of $57 million in the second quarter of 1998 increased by $20 million, or 54%, compared with the same quarter of 1997. Net income increased due to a more favorable price-cost relationship in nylon and polyester, productivity actions, and the elimination of losses from exiting the European carpet fibers business and a portion of the North American textiles business. Transportation Products net income of $14 million in the second quarter of 1998 decreased by $15 million, or 52%, compared with the second quarter of 1997. The decrease primarily reflects the absence of net income from the disposed safety restraints business. Net income also declined for the Automotive Products Group. Six Months 1998 Compared with Six Months 1997 _____________________________________________ Net sales in the first six months of 1998 were $7.5 billion, an increase of $610 million, or 9%, compared with the first six months of 1997. Of this increase, $694 million was due to higher sales volume and $582 million was from recent acquisitions, offset in part by a $490 million reduction for disposed 11

businesses, mainly the safety restraints business. Selling prices were lower by $111 million and the impact of foreign exchange reduced sales by $65 million. Aerospace Systems sales of $2,334 million in the first six months of 1998 increased by $495 million, or 27%, compared with the first six months of 1997. This sales increase was led by strong sales by Aerospace Equipment Systems across all product lines, as well as the acquisition of Grimes. Electronic & Avionics Systems also had substantially higher sales reflecting strong demand for the Company's flight safety and cockpit communication products. The acquisition of Banner also contributed to higher sales for Aerospace Systems. Specialty Chemicals & Electronic Solutions sales of $1,187 million in the first six months of 1998 increased by $97 million, or 9%, compared with the same period of 1997. Sales of Specialty Chemicals were significantly higher primarily reflecting the acquisition of Astor. However, sales of Electronic Materials declined slightly due to soft semiconductor and electronics markets. Turbine Technologies sales of $1,741 million in the first six months of 1998 were $270 million, or 18%, higher compared with the same period of 1997. Engines sales of auxiliary power units to the commercial air transport and regional aircraft markets and propulsion engine demand in the business jet market were strong. Sales of turbochargers were also higher due primarily to the continued strong demand in European diesel-powered passenger cars. Performance Polymers sales of $1,058 million in the first six months of 1998 were $60 million, or 6%, higher compared with the first six months of 1997, due mainly to growth in specialty films and engineering plastics. Transportation Products sales of $1,190 million in the first six months of 1998 decreased by $312 million, or 21%, compared with the first six months of 1997. The decrease primarily reflects the disposition of the safety restraints business. Excluding the disposed safety restraints business, sales were 12% higher. This increase in sales reflects significantly higher sales for Truck Brake Systems and the acquisitions of Prestone and Holt Lloyd. The increase was somewhat offset by lower sales for friction materials, spark plugs and filters. Cost of goods sold as a percent of net sales decreased from 77.7% in the first six months of 1997 to 76.6% in the first six months of 1998 primarily reflecting results of the Company's continuing Six Sigma programs to improve productivity and lower manufacturing and materials costs. Income from operations of $953 million in the first six months of 1998 increased by $168 million, or 21%, compared with the first six months of 1997. On a segment basis, Aerospace Systems income from operations increased by 69%. Specialty Chemicals & Electronic Solutions increased by 8% and Performance Polymers increased by 68%. Income from operations for Turbine Technologies and Transportation Products decreased by 2% and 53%, respectively. Excluding the divested safety restraints business, Transportation Products income from operations decreased by 30%. The Company's operating margin for the first six months of 1998 was 12.7%, compared with 11.4% for the same period last year. See the discussion of net income below for information by segment. 12

Productivity improved by 5.7% for the first six months of 1998 compared with the first six months of 1997 primarily reflecting ongoing Six Sigma initiatives to lower materials and manufacturing costs. Equity in income of affiliated companies of $63 million in the first six months of 1998 represents a decrease of $33 million, or 34%, compared with the same period of 1997, primarily due to lower earnings from UOP and the absence of earnings from investments divested in connection with the sale of the safety restraints business. Other income (expense), a $1 million loss in the first six months of 1998, was unfavorable by $49 million compared with the same period of 1997, reflecting lower interest income primarily due to a lower cash position because of spending for acquisitions and repurchases of the Company's common stock and the absence of foreign exchange gains offset somewhat by lower minority interest. Interest and other financial charges of $66 million in the first six months of 1998 decreased by $15 million, or 19%, compared with the first six months of 1997. This decrease results from lower tax interest expense due to an acceleration of worldwide tax audits resulting in developments favorable to the Company's position, offset in part by higher debt-related interest expense reflecting increased levels of debt. The effective tax rate in the first six months of 1998 decreased to 31.5% compared with 33.5% in 1997, primarily due to tax benefits on exports, an increase in energy tax credits and other tax planning strategies. Net income of $650 million, or $1.13 per share, in the first six months of 1998 was 15% higher than net income of $564 million, or $0.97 per share, in the first six months of 1997. Aerospace Systems net income of $239 million in the first six months of 1998 improved by $95 million, or 66%, compared with the same period of 1997. This increase in net income was led by substantially higher sales and improved factory performance for Electronic & Avionics Systems. The acquisitions of Grimes and Banner also contributed to the higher net income. Specialty Chemicals & Electronic Solutions net income of $164 million in the first six months of 1998 represents a decrease of $23 million, or 12%, compared with the same period of 1997. Electronic Materials net income declined substantially due principally to weakness in the semiconductor and electronics markets. Specialty Chemicals net income also decreased due principally to lower results for UOP. Turbine Technologies net income of $116 million in the first six months of 1998 increased by $8 million, or 7%, compared with the first six months of 1997, reflecting higher sales and productivity improvements for Engines. Performance Polymers net income of $102 million in the first six months of 1998 improved by $44 million, or 76%, compared with the first six months of 1997. This improvement in net income was primarily driven by volume growth across most businesses, a more favorable price-cost relationship in nylon and polyester and productivity initiatives. 13

Transportation Products net income of $18 million in the first six months of 1998 was $44 million, or 71%, lower than in the first six months of 1997. The decrease primarily reflects the absence of net income from the disposed safety restraints business. Net income was also lower for the Automotive Products Group. Financial Condition ___________________ June 30, 1998 Compared with December 31, 1997 _____________________________________________ On June 30, 1998, the Company had $529 million in cash and cash equivalents and short-term investments compared with $1,041 million at year-end 1997. The decrease mainly reflects funds deployed for acquisitions and repurchases of the Company's common stock. The Company's long-term debt on June 30, 1998 was $1,638 million, an increase of $423 million compared with year-end 1997. This increase principally reflects the issuance of new long-term debt, as described in Note 6 to the financial statements. Total debt of $2,502 million on June 30, 1998 was $195 million higher than at December 31, 1997. The Company's total debt as a percent of capital at June 30, 1998 was 31.9%, compared with 31.7% at year-end 1997. During the first six months of 1998, the Company spent $280 million for capital expenditures, compared with $309 million in the corresponding period of 1997. This decline in capital spending is primarily due to the divestiture of the safety restraints business. On August 4, 1998, the Company announced that it intends to commence a tender offer subject to customary terms and conditions for all of the outstanding shares of AMP Incorporated, a Pennsylvania corporation (AMP), at $44.50 per share in cash, or approximately $9.8 billion for the approximately 220 million AMP shares outstanding. Any such offer will be made by way of offering materials complying with the requirements of applicable federal and state securities laws. The Company expects to finance such offering through bank credit facilities, issuance of commercial paper, long-term debt offerings and/or equity offerings. In January 1998, the Company acquired Banner, distributors of FAA-certified aircraft hardware, for common stock valued at approximately $350 million. The acquired operations have annual sales of about $250 million, principally to commercial air transport and general aviation customers. Also, in the first quarter of 1998, the Company completed the sale of its underwater detection systems business to L-3 Communications Corporation for approximately $70 million in cash. The ocean systems unit had annual revenues of about $70 million. In June 1998, the Company acquired Pharmaceutical Fine Chemicals S.A. (PFC) for approximately $390 million, including assumed liabilities. PFC manufactures and distributes active and intermediate pharmaceutical chemicals and had sales of approximately $110 million in 1997. Also in June 1998, the Company completed the sale of its 50%-owned automotive catalyst business to General Motors Corporation for approximately $50 million in cash. This business had annual sales of about $250 million. The Company continuously assesses the relative strength of its portfolio of businesses as to strategic fit, market position and profit contribution in order 14

to upgrade its combined portfolio and identify operating units that will most benefit from increased investment. The Company considers acquisition candidates that will further its strategic plan and strengthen its existing core businesses. The Company also identifies operating units that do not fit into its long-term strategic plan based on their market position, relative profitability or growth potential. These operating units are considered for potential divestiture, restructuring or other repositioning action. During the first six months of 1998, the Company sold certain non-strategic businesses and other assets. During the first six months of 1998, the Company repurchased 14.0 million shares of its common stock for $591 million. During the second quarter 1998, the Company announced its intentions to repurchase up to $2.2 billion of its common stock over the next two years. Common stock is repurchased to meet the expected requirements for shares issued under employee benefit plans, acquisitions, a shareowner dividend reinvestment plan and to reduce common stock outstanding. At June 30, 1998, the Company was authorized to repurchase 65.7 million shares of its common stock. The amount of common stock repurchased may be affected by the commencement of a tender offer for the outstanding shares of AMP. The Company has recognized the need to ensure that its business operations will not be adversely affected by the upcoming calendar year 2000 and is cognizant of the time sensitive nature of the problem. The Company has assessed how it may be impacted by Year 2000 and has formulated and commenced implementation of a comprehensive plan to address all known aspects of the Year 2000 problem: information systems, production and facilities equipment, products, suppliers and customers. The plan, as it relates to information systems, involves a combination of software modification, upgrades and replacement. The Company's target date for the remediation of its critical information systems is December 31, 1998 and the target date for remediation of the remainder of its information systems is March 31, 1999. The Company has completed the assessment and development of remediation plans with respect to substantially all of the Company's products and expects that the assessment and development of remediation plans with respect to production and facilities equipment, suppliers and customers will be substantially complete by the end of the third quarter of 1998. The Company has begun remediating production and facilities equipment and products and expects that remediation will be substantially completed by March 31, 1999. The Company expects that development of remediation plans with respect to major suppliers and customers will be completed by year-end 1998 and that remediation will be substantially completed by March 31, 1999; however, the Company can provide no assurance that Year 2000 compliance plans will be successfully completed by suppliers and customers in a timely manner. The Company's preliminary estimate of the total cost for Year 2000 compliance, based on the assessment to date plus estimates of remediation costs on components not yet fully assessed, is approximately $150 million, of which approximately $50 million has been incurred through June 30, 1998. Incremental spending has not been and is not expected to be material because most Year 2000 compliance costs will be met with amounts that are normally budgeted for procurement and maintenance of the Company's information systems and production and facilities equipment. The redirection of spending from procurement of information systems and production facilities equipment to 15

implementation of Year 2000 compliance plans may in some instances delay productivity improvements. If the Company is not successful in implementing its Year 2000 compliance plan, it may have a material adverse impact on the Company's consolidated results of operations and financial condition. Because of the importance of addressing the Year 2000 problem, the Company expects to develop by year-end 1998 contingency plans and trained specialist teams to implement such contingency plans to address any issues that may not be corrected by implementation of the Company's Year 2000 compliance plan in a timely manner. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133-"Accounting for Derivative Instruments and Hedging Activities" (SFAS No. 133), effective for fiscal years beginning after June 15, 1999. SFAS No. 133 requires derivatives to be recorded on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in values of derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company is completing an analysis of SFAS No. 133 which is not expected to have a material impact on the Company's results of operations or financial position. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained herein, the matters discussed in this quarterly report are forward- looking statements which involve risks and uncertainties, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices, and other factors discussed in the Company's filings with the Securities and Exchange Commission. Review by Independent Accountants _________________________________ The "Independent Accountants' Report" included herein is not a "report" or "part of a Registration Statement" prepared or certified by an independent accountant within the meanings of Section 7 and 11 of the Securities Act of 1933, and the accountants' Section 11 liability does not extend to such report. Item 3. Quantitative and Qualitative Disclosures about Market Risk See the Company's most recent annual report filed on Form 10- K (Item 7A). There has been no material change in this information. PART II. OTHER INFORMATION Item 2. Changes in Securities During the second quarter of 1998, the Company made two exchange offers to holders of certain of its outstanding debt securities. In the first such exchange offer, approximately $52 million principal amount of the Company's 9.065% Debentures due June 1, 2033 were issued to tendering holders of the Company's 9 1/2% Debentures due June 1, 2016. The 9.065% Debentures bear interest at 9.065% per annum payable on June 1 and December 1, commencing December 1, 1998, to holders of record on the preceding May 15 or November 15. 16

In the second such exchange offer, approximately $133 million principal amount of the Company's 6 1/8% Notes due July 1, 2005 were issued to tendering holders of approximately $79 million principal amount of the Company's 9 7/8% Debentures due June 1, 2002 and approximately $39 million principal amount of the Company's 9.20% Debentures due February 15, 2003. The 6 1/8% Notes bear interest at 6 1/8% per annum payable on January 1 and July 1, commencing January 1, 1999 to holders of record on the preceding June 15 or December 15. Each of the exchange offers was made pursuant to an exemption from registration under Section 3(a)(9) of the Securities Act of 1933 solely to existing debtholders of the Company. Item 5. Other Information The following represents segment data for 1997, 1996 and the three months ending March 31, 1998 under the Company's new five business segments. (Dollars in millions) Years 1997 Specialty and 1996 Chemicals & Corporate Aerospace Electronic Turbine Performance Transportation and Un- Systems Solutions Technologies Polymers Products allocated Other(1) Total _________ ___________ ____________ ___________ ______________ __________ _______ _____ Net sales 1997 $4,117 $2,218 $3,111 $2,030 $2,983 $ 13 - $14,472 1996 3,635 2,117 2,775 1,888 3,539 17 - 13,971 Depreciation and 1997 109 97 91 129 85 35 - 546 amortization 1996 116 84 87 122 101 41 - 551 Income from 1997 608 326 401 215 194 (97) (11) 1,636 operations 1996 469 355 264 211 280 (88) 18 1,509 Net income 1997 368 328 236 134 95 5 4 1,170 1996 287 307 144 125 156 (8) 9 1,020 Capital 1997 132 135 111 174 115 50 - 717 expenditures 1996 83 111 103 220 163 75 - 755 Identifiable 1997 3,611 2,452 2,768 1,607 2,114 1,155 - 13,707 assets 1996 2,902 1,858 2,706 1,533 1,757 2,073 - 12,829 Three months ending March 31, 1998 __________________ Net sales $1,130 $ 598 $ 820 $ 527 $ 569 $ 2 - $3,646 Net income 116 82 53 45 4 - - 300 (1) The Other column includes in 1997 a pre- and after-tax provision for repositioning and other charges of $237 and $159 million. Also includes in 1997 a pre- and after-tax gain on the sale of the safety restraints business of $277 and $196 million, and the pre-and after- tax charge related to the settlement of the 1996 braking business sale of $51 and $33 million. Includes in 1996 a pre-and after-tax provision for repositioning and other charges of $637 and $359 million. Also includes in 1996 a pre- and after-tax gain on the sale of the braking business of $655 and $368 million. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibits are filed with this Form 10-Q: 15 Independent Accountants' Acknowledgment Letter as to the incorporation of their report relating to unaudited interim financial statements 27 Financial Data Schedule 17

(b) Reports on Form 8-K. During the three months ended June 30, 1998: 1) On April 22, 1998, a report was filed reporting the results of operations for the three-month period ending March 31, 1998. 2) On April 28, 1998, a report was filed reporting, under Item 9, unregistered sales of the Company's Common Stock in reliance on Regulation S under the Securities Act. 3) On May 20, 1998, a report was filed reporting an offer to exchange new debt for outstanding debt. 4) On May 29, 1998, a report was filed reporting a revised share repurchase program. 5) On June 18, 1998, a report was filed reporting the appointment of a President and Chief Operating Officer. 18

SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AlliedSignal Inc. Date: August 7, 1998 By: /s/ Richard F.Wallman _________________________ Richard F. Wallman Senior Vice President and Chief Financial Officer (on behalf of the Registrant and as the Registrant's Principal Accounting Officer) 19

EXHIBIT INDEX Exhibit Number Description 2 Omitted (Inapplicable) 3 Omitted (Inapplicable) 4 Omitted (Inapplicable) 10 Omitted (Inapplicable) 11 Omitted (Inapplicable) 15 Independent Accountants' Acknowledgment Letter as to the incorporation of their report relating to unaudited interim financial statements 18 Omitted (Inapplicable) 19 Omitted (Inapplicable) 22 Omitted (Inapplicable) 23 Omitted (Inapplicable) 24 Omitted (Inapplicable) 27 Financial Data Schedule 99 Omitted (Inapplicable) 20


                                        EXHIBIT 15
                                        __________ 




August 7, 1998



Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549

Dear Ladies and Gentlemen:

We are aware that the June 30, 1998 Quarterly Report on Form 10-Q of
AlliedSignal Inc. which includes our report dated August 7, 1998 (issued
pursuant to the provisions of Statement on Auditing Standard No. 71) 
will be incorporated by reference in the Prospectuses constituting part of
AlliedSignal Inc.'s Registration Statements, on Forms S-8 (Nos. 33-09896,
33-51455, 33-55410, 33-58347, 33-60261, 33-62963, 33-64295, 333-14673,
333-57509, 333-57515, 333-57517 and 333-57519, on Forms S-3 (Nos. 
33-13211, 33-14071, 33-55425, 33-64245, 333-22355, 333-44523, 333-45555
and 333-49455) and on Form S-8 (filed as an amendment to Form S-14,
No. 2-99416-01).  We are also aware of our responsibilities under the
Securities Act of 1933.


Very truly yours,





Price Waterhouse LLP

  

5 This schedule contains summary financial information extracted from the consolidated balance sheet at June 30, 1998 and the consolidated statement of income for the six months ended June 30, 1998 and is qualified in its entirety by reference to such financial statements. 1,000,000 6-MOS DEC-31-1998 JUN-30-1998 507 22 1,474 32 2,409 5,312 9,106 4,909 13,897 3,918 1,638 0 0 716 4,107 13,897 7,515 7,515 5,758 5,758 0 0 66 949 299 650 0 0 0 650 1.15 1.13