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 Quarter Ended                    Commission File Number
      September 30, 1998                              1-8319





                            GATX CAPITAL CORPORATION


      Incorporated in the                 IRS Employer Identification Number
       State of Delaware                               94-1661392

                             Four Embarcadero Center
                             San Francisco, CA 94111
                                 (415) 955-3200



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  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  Yes X  No __
                                               


All Common Stock of Registrant is held by GATX Financial Services, Inc.
   (a wholly-owned subsidiary of GATX Corporation).

As of November 12, 1998, Registrant has outstanding 1,031,250 shares of $1 par
value Common Stock.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.




                                      
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.   Financial Statements

GATX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(in thousands)

                                       Three Months Ended    Nine Months Ended
                                          September 30,        September 30,
                                          1998      1997      1998      1997
                                        -------   -------   --------  ---------
                                            (Unaudited)          (Unaudited)
REVENUES:

Investment and asset management      $  116,053  $107,350   $352,336   $312,993 
Technology equipment sales and service   49,006    43,885    123,087    137,688
                                       --------   -------   --------  ---------
                                        165,059   151,235    475,423    450,681
                                       --------   -------   --------  ---------
EXPENSES:

Interest                                 28,063    23,335     87,670     67,820
Operating leases                         34,763    29,790    101,403     85,757
Cost of technology equipment
  sales & service                        37,711    37,200     96,295    113,734 
Selling, general & administrative        30,073    33,554     87,618     86,234
Provision for losses on investments       3,275     3,506      7,775      9,531
Other                                       942     4,074      2,430      7,368
                                       --------  --------   --------  ---------
                                        134,827   131,459    383,191    370,444
                                       --------  --------   --------  ---------

Income before income taxes               30,232    19,776     92,232     80,237
                                       
Provision for income taxes               12,490     8,013     39,361     32,500
                                       --------  --------   --------  ---------

NET INCOME                               17,742    11,763     52,871     47,737

Reinvested earnings at 
  beginning of period                   234,579   209,551    212,750    185,686
Dividends paid to stockholder            (9,958)   (7,929)   (23,258)   (20,038)
                                       --------  --------   --------  ---------
                               
REINVESTED EARNINGS AT END OF PERIOD  $ 242,363 $ 213,385  $ 242,363  $ 213,385
                                      ========= ========= ==========  =========








                                      1
<PAGE>

GATX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                  September 30,    December 31,
                                                       1998          1997
                                                   -----------    -----------
                                                   (Unaudited)
ASSETS:

Cash and cash equivalents                         $    42,512    $    61,990
Investments:
   Direct financing leases                            515,587        666,524
   Leveraged leases                                   114,547        170,555
   Operating lease equipment-
        net of depreciation                           496,664        524,523
   Secured loans                                      257,098        180,331
   Investment in joint ventures                       566,754        549,596
   Assets held for sale or lease                       21,304         15,398
   Other investments                                   73,833         52,690
   Investment in future residuals                      19,329         19,693
   Allowance for losses on investments               (122,880)      (121,576)
                                                   -----------   ------------
          Total investments                         1,942,236      2,057,734
                                                   -----------   ------------

Due from GATX Corporation                              20,307         35,904
Other assets                                          146,056        161,515
                                                   -----------   -----------
TOTAL ASSETS                                      $ 2,151,111    $ 2,317,143
                                                   ===========   ============

LIABILITIES AND STOCKHOLDER'S EQUITY:

Accrued interest                                  $    27,089    $    16,070
Accounts payable and other liabilities                142,897        167,825
Debt financing:
   Commercial paper and bankers' acceptances           14,500        127,832    
   Notes Payable                                       46,620         74,161
   Obligations under capital leases                     8,633          9,754
   Senior term notes                                1,061,600      1,155,600 
                                                  ------------    ----------
          Total debt financing                      1,131,353      1,367,347
                                                  ------------    ----------

Nonrecourse obligations                               369,950        329,820
Deferred income                                        10,479         13,556
Deferred income taxes                                  74,340         55,600
   
Stockholder's equity:
   Convertible preferred stock, par value $1,         125,000        125,000
       and additional paid-in capital
   Common stock, par value $1, and
       additional paid-in capital                      28,960         28,960
   Reinvested earnings                                242,363        212,750
   Accumulated other comprehensive income:
    Foreign currency translation adjustment            (5,510)        (4,404)
    Unrealized gain on available-for-sale securities    4,190          4,619
                                                 -------------    ----------
     Total accumulated other comprehensive income      (1,320)           215
                                                 -------------    ----------
             Total stockholder's equity               395,003        366,925
                                                 -------------    ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY        $ 2,151,111    $ 2,317,143
                                                 =============   =========== 


                                               
                                       2
<PAGE>

GATX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                            Nine Months Ended
                                                               September 30,
                                                           1998           1997
                                                        ----------    ---------
                                                              (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                               $ 52,871     $ 47,737
Reconciliation of net income to net cash flows 
provided by operating activities:
   Provision for losses on investments                      7,775        9,531
   Depreciation expense                                    72,306       56,448
   Provision for deferred income taxes (benefits)          20,976       (3,443)
   Gain on sale of assets                                 (53,337)     (63,792)
   Changes in assets and liabilities:
      Other assets                                         13,422      (15,656)
      Due from GATX Corporation                            15,597       29,771  
      Accrued interest, accounts payable
       and other liabilities                              (13,909)       8,068
      Deferred income                                      (3,077)         756
   Other - net                                            (20,733)      (3,055)
                                                        ----------     --------
Net cash flows provided by operating activities            91,891       66,365
                                                        ----------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:

Investments in leased equipment, net of
       nonrecourse borrowings for leveraged leases       (256,756)    (438,825)
Loans extended to borrowers                              (134,782)     (28,628)
Other investments                                         (94,662)    (110,536)
                                                        ----------    ---------
   Total investments                                     (486,200)    (577,989)
                                                        ----------    ---------
Lease rents received, net of earned income and
        leveraged lease nonrecourse debt service          119,517       82,293
Loan principal received                                   283,623       51,424
Proceeds from sale of assets                              144,407      201,931
Joint venture investment recovery, net of earned income    46,406       30,531
                                                       -----------    ---------
   Recovery of investments                                593,953      366,179
                                                       -----------    ---------
Net cash flows provided by (used in)
investing activities                                      107,753     (211,810)
                                                       -----------    ---------
                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from nonrecourse obligations                     152,651      130,095  
Repayment of senior term notes                            (94,000)    (130,000) 
Repayment of nonrecourse obligations                     (112,521)     (81,304)
Net (decrease) increase in short-term borrowings         (140,873)     285,617
Dividends paid to stockholder                             (23,258)     (20,038)
Other financing activities                                 (1,121)      (2,273)
                                                       -----------    ---------
Net cash flows (used in) provided by financing activities(219,122)     182,097
                                                       -----------    ---------
Net (decrease) increase in cash and cash equivalents      (19,478)       36,652
Cash and cash equivalents at beginning of period           61,990       18,482  
                                                       -----------   ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $  42,512    $  55,134
                                                        ==========   ========== 



                                      3
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.    Financial Statements, continued

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997


1.   The  consolidated  balance  sheet  of  GATX  Capital  Corporation  and  its
     subsidiaries  ("the  Company")  at December  31, 1997 was derived  from the
     audited financial statements at that date. All other consolidated financial
     statements are unaudited and include all  adjustments,  consisting  only of
     normal recurring items,  which  management  considers  necessary for a fair
     statement of the consolidated  results of operations and financial position
     for and as of the end of the indicated  periods.  Operating results for the
     nine-month  period ended September 30, 1998 are not necessarily  indicative
     of the results that may be achieved for the entire year.

2.   Certain  prior year  amounts  have been  reclassified  to conform to
     current presentation.

3.   The Company is engaged in various  matters of litigation and has unresolved
     claims pending.  In one matter, the Company,  through an affiliate,  is the
     subject of both litigation and unasserted  claims related to the conversion
     of certain  aircraft from passenger to freighter  configuration.  While the
     amounts  claimed in this  matter and other  matters  are  substantial,  the
     ultimate liability with respect to such claims cannot be determined at this
     time. It is the opinion of management that damages,  if any, required to be
     paid by the Company in the  discharge  of such matters are not likely to be
     material to the Company's financial position or results of operations.

4.   As of  January  1, 1998,  the  Company  adopted  Statement  130,  Reporting
     Comprehensive Income. Statement 130 establishes new rules for the reporting
     and  display of  comprehensive  income  and its  components;  however,  the
     adoption of this  Statement  had no impact on the  Company's  net income or
     stockholder's equity.  Statement 130 requires unrealized gains or losses on
     the   Company's   available-for-sale   securities   and  foreign   currency
     translation  adjustments,  which prior to adoption were reported separately
     in  stockholder's  equity,  to be included in other  comprehensive  income.
     Prior year financial  statements  have been  reclassified to conform to the
     requirements of Statement 130.

     During the nine months ended  September  30, 1998 and  September  30, 1997,
     respectively,  total  comprehensive  income  amounted to $51.3  million and
     $46.2 million.

5.   In June 1998, the Financial Accounting Standards Board issued Statement No.
     133, Accounting for Derivative Instruments and Hedging Activities, which is
     required to be adopted in years  beginning after June 15, 1999. The Company
     has not yet  determined  what effect the adoption of SFAS No. 133 will have
     on its financial position and results of operations.




                                        4
<PAGE>

PART I.  FINANCIAL INFORMATION, continued
Item 2.   Management's Discussion and Analysis

RESULTS OF OPERATIONS

Net income  during  the nine  months  ended  September  30,  1998 was $52.9
million  compared to $47.7 million  during the same period in 1997.  Income from
investments  was greater during 1998,  mainly due to larger  average  investment
balances.  This increase in investment income was partially offset by a decrease
in income from the Company's technology equipment sales and service activities.

Net income  earned  during the three months ended  September  30, 1998 was $17.7
million compared to $11.8 million in the third quarter of 1997. This increase in
income  is  primarily  due to  one-time  expenses  incurred  by the  Company  in
connection  with two  significant  events  in the  third  quarter  of 1997:  the
acquisition  of the 20% of Sun  Financial  Group,  Inc. not already owned by the
Company and the purchase of a portfolio  of leased  assets owned by Pitney Bowes
Credit  Corporation.  Increases in revenue  related to the remarketing of assets
and in gross margins on technology equipment sales and services also contributed
to this increase.

Overview
--------
The  Company  engages in two main  activities:  (1) it is  actively  involved in
asset-based  investment  and generates  income by financing  equipment  (through
lease, loan and joint venture  investments);  by remarketing assets; by managing
the  equipment  related  investment  portfolios  of others;  and by brokering or
arranging asset financing transactions,  all of which are intertwined and (2) it
provides a wide range of technology  services enabling its customers to acquire,
construct and finance information networks. Sales and service revenue related to
the Company's  technology solutions business is included in technology equipment
sales and service revenue.  Revenue earned from financing  related to technology
solutions is included in the investment and asset management revenue line.

Revenues
--------
Investment and asset management revenue increased $8.7 million and $39.3 million
during the three and nine-month periods ended September 30, 1998,  respectively,
compared to the same  periods in 1997.  Revenue  generated  from higher  average
investment  balances during 1998 was the most  significant  contributor to these
increases.  Total average  investments were  approximately  $236.7 million (13%)
greater  during the nine months  ended  September  30, 1998 than during the same
period in 1997.

Asset  remarketing  income,  a  component  of  investment  and asset  management
revenue,  includes  gains  on sales  of  Company  owned  assets  and fee  income
(including  residual shares)  generated from providing  remarketing  services to
third parties,  including the equipment related investment portfolios managed by
the Company. Asset remarketing income was a significant contributor to income in
both the first nine months of 1998 ($76.1  million) and the first nine months of
1997  ($76.8  million).   Although  it  has  historically   been  a  significant
contributor to income,  income from asset remarketing  opportunities,  which are
realized  at  lease  end or in  response  to  specific  market  conditions,  can
fluctuate significantly depending on market conditions.

Technology  equipment  sales and service  revenue was $5.1 million higher during
the quarter than during the third quarter of 1997 and $14.6 million lower during
the first  nine  months  of 1998 than  during  the  first  nine  months of 1997.
Although  revenues  were lower  during the first three  quarters of 1998,  gross
margins  improved  since the  decrease  in  revenues  was more than  offset by a
decrease in cost of  technology  equipment  sales and service.  The  information
technology  business,   particularly  the  market  for  communications   network
technology,  is  experiencing  and will  continue to  experience a rapid pace of
change  which may have a  significant  effect on the demand for products and the
gross margins earned on sales of products.  During 1998 the Company's technology
equipment  sales and  service  activities  have been  adversely  affected by the
decline in demand for IBM legacy network protocol equipment. While the Company's

                                       5
<PAGE>

strategy includes adding products for a broader range of network protocols, much
of its historical sales base was in these IBM related products.  Consistent with
its strategy,  beginning with the second quarter of 1998, the Company  broadened
its product  line by becoming a value added  reseller  for the products of Cisco
Systems,  Inc., the world's leading supplier of internet related  communications
technology equipment.  Sales of Cisco products did not have a significant impact
on gross margins during the quarter.
 
Expenses
--------
Higher average borrowings (to fund new investments) resulted in interest expense
being higher than last year.  Continued growth in the Company's  operating lease
portfolio  resulted in an increase in operating  lease  expense,  which includes
depreciation expense and rent expense related to off-balance sheet financing.

Selling, general and administrative expenses were lower during the third quarter
of 1998 than during the third quarter of 1997 primarily due to one-time expenses
incurred  during the third quarter of 1997 related to the acquisition of the 20%
of Sun Financial  Group,  Inc. not already owned by the Company and the purchase
of a  portfolio  of leased  assets  owned by Pitney  Bowes  Credit  Corporation.
Selling,  general and administrative  expenses were higher during the first nine
months of 1998 due primarily to higher human  resource and other  administrative
expenses  associated with 1) increased  investment and asset management business
activity  and 2) costs  incurred  to support a  technology  equipment  sales and
service  infrastructure that was larger during 1998 than during 1997. During the
third  quarter the Company  continued  its effort to more closely align the size
and nature of the technology  equipment  sales and service  infrastructure  with
current market conditions by reducing costs.

The allowance for losses  increased $1.3 million during the first nine months of
1998 as a result of a $7.8  million  provision  for losses,  write-offs  of $7.2
million and $0.7 million of recoveries of previously written off investments. At
September 30, 1998, the allowance for losses is 6.3% of  investments,  including
off-balance sheet assets and after deducting nonrecourse debt.

LIQUIDITY AND CAPITAL RESOURCES

The Company  generates cash from operations and from portfolio  proceeds and has
certain  facilities for borrowing.  In addition,  certain lease transactions are
financed by obtaining  nonrecourse  loans equal to the present  value of some or
all of the rental streams.

At September  30, 1998 the Company had borrowing  capacity  consisting of $182.0
million  remaining under its Series E shelf  registration  and $285.5 million of
unused  capacity  under its  commercial  paper and bankers'  acceptances  credit
agreements.  Two of the Company's subsidiaries also maintain various stand-alone
bank facilities.

During the first  quarter of 1998 the Company  placed the proceeds  from certain
asset sales (approximately $55.1 million) in trust with qualified intermediaries
pending the  identification  and acquisition of qualified  replacement assets in
order to  effect  like-kind  exchanges  for  federal  income  tax  purposes.  At
September  30,  1998  approximately  $18.2  million  remains  in  trust  and  is
classified as cash and cash equivalents in the accompanying balance sheet.

Also  during  the  first  quarter  of 1998  the  Company  financed  the  sale of
approximately   $173.3  million  of  direct  financing  leases  resulting  in  a
recharacterization  of the Company's investment as secured loans. The loans were
repaid  during the third  quarter of 1998,  providing  a  significant  amount of
portfolio  proceeds  which  the  Company  used  primarily  to repay  outstanding
short-term  borrowings.  

                                       6
<PAGE>

The Company's capital structure includes both fixed and floating rate debt.
The  Company  ensures a stable  margin  over its cost of funds by  approximately
matching its fixed and floating rate  investments to its fixed and floating rate
borrowings.

At September 30, 1998, the Company had approved unfunded  transactions  totaling
approximately $876.0 million, including approximately $155.0 million expected to
fund during the remainder of 1998. Once approved for funding,  a transaction may
not be  completed  for various  reasons,  or the  investment  may be shared with
partners or sold.


YEAR 2000 READINESS

The Company  continues to address what is commonly  referred to as the Year 2000
problem.  The Company has completed an  assessment  of its critical  information
systems and is modifying and replacing its in-house  developed  software as well
as upgrading  its  vendor-supported  software so that its computer  systems will
function  properly  with  respect  to  dates in the  year  2000 and  thereafter.
Additionally,  other less  critical  information  systems have been reviewed and
corrective action is being taken where indicated.

The Company also is reviewing its operating  assets to determine any exposure to
time-sensitive controls which may be embedded in the equipment. These situations
are being  assessed on an ongoing basis and  replacement or remediation is being
undertaken where indicated.

The Company is  inquiring  of both  customers  and vendors  where the  Company's
information  systems  interface  directly  with third parties to ensure that the
interfaces and the third party systems are or will be Year 2000 compliant. Where
considered appropriate,  the Company is working directly with such third parties
to test or remediate  such systems.  The Company also  interacts  electronically
with certain  external  entities but has no means of ensuring  that they will be
Year 2000 ready. Additionally,  the Company has been inquiring of key vendors in
an effort to  establish  the  ability  of the  provider  to  deliver  product or
services on a timely basis in the year 2000.

The Company  believes it has an  effective  program in place to resolve the Year
2000 issue in a timely manner and to minimize the Company's  exposure.  If these
steps were not taken,  or are not  completed  timely,  the Year 2000 issue could
have a  significant  impact on the  operations  of the  Company.  The project is
estimated to be completed during 1999, which is prior to any anticipated  impact
on its  operating  systems.  Based on the  progress and results of the Year 2000
project thus far, the Company  believes that the Year 2000 issue should not pose
significant operational problems.  Despite such belief, the Company is preparing
a contingency  plan to address  circumstances  arising as a result of unknown or
unforeseeable system or other failures related to the Year 2000 issue. The total
Year 2000 project cost is estimated to be immaterial to the Company's results of
operations.


FORWARD LOOKING STATEMENTS

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




                                       7
<PAGE>

PART II.  OTHER INFORMATION
Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits:

     4.  Amended and Restated Credit  Agreement dated as of July 1, 1998 between
         the Company, the Lenders listed on the signature pages thereto, and the
         Chase Manhattan Bank, as administrative agent.

     27. Financial Data Schedule

(b)  The  Company  filed no reports on Form 8-K  during the three  months  ended
     September 30, 1998.




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.




                               GATX CAPITAL CORPORATION


                               /s/ Jack Jenkins-Stark
                               -----------------------
                               Jack Jenkins-Stark
                               Senior Vice President - Finance
                                    

                               /s/ Delphine M. Regalia
                               ------------------------
                               Delphine M. Regalia
                               Vice President and Controller





November 16, 1998

                                       








                                       8
<PAGE>
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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 Quarter Ended                    Commission File Number
      September 30, 1998                              1-8319

                            GATX CAPITAL CORPORATION

      Incorporated in the                 IRS Employer Identification Number
       State of Delaware                               94-1661392

                             Four Embarcadero Center
                             San Francisco, CA 94111
                                 (415) 955-3200

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  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                  Yes X  No __
                                               

All Common Stock of Registrant is held by GATX Financial Services, Inc.
   (a wholly-owned subsidiary of GATX Corporation).

As of November 12, 1998, Registrant has outstanding 1,031,250 shares of $1 par
value Common Stock.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND
(b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.
PART I.  FINANCIAL INFORMATION
Item 1.   Financial Statements

GATX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND REINVESTED EARNINGS
(in thousands)

                                       Three Months Ended    Nine Months Ended
                                          September 30,        September 30,
                                          1998      1997      1998      1997
                                        -------   -------   --------  ---------
                                            (Unaudited)          (Unaudited)
REVENUES:

Investment and asset management      $  116,053  $107,350   $352,336   $312,993 
Technology equipment sales and service   49,006    43,885    123,087    137,688
                                       --------   -------   --------  ---------
                                        165,059   151,235    475,423    450,681
                                       --------   -------   --------  ---------
EXPENSES:

Interest                                 28,063    23,335     87,670     67,820
Operating leases                         34,763    29,790    101,403     85,757
Cost of technology equipment
  sales & service                        37,711    37,200     96,295    113,734 
Selling, general & administrative        30,073    33,554     87,618     86,234
Provision for losses on investments       3,275     3,506      7,775      9,531
Other                                       942     4,074      2,430      7,368
                                       --------  --------   --------  ---------
                                        134,827   131,459    383,191    370,444
                                       --------  --------   --------  ---------

Income before income taxes               30,232    19,776     92,232     80,237
                                       
Provision for income taxes               12,490     8,013     39,361     32,500
                                       --------  --------   --------  ---------

NET INCOME                               17,742    11,763     52,871     47,737

Reinvested earnings at 
  beginning of period                   234,579   209,551    212,750    185,686
Dividends paid to stockholder            (9,958)   (7,929)   (23,258)   (20,038)
                                       --------  --------   --------  ---------
                               
REINVESTED EARNINGS AT END OF PERIOD  $ 242,363 $ 213,385  $ 242,363  $ 213,385
                                      ========= ========= ==========  =========

                                      1
GATX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                                  September 30,    December 31,
                                                       1998          1997
                                                   -----------    -----------
                                                   (Unaudited)
ASSETS:

Cash and cash equivalents                         $    42,512    $    61,990
Investments:
   Direct financing leases                            515,587        666,524
   Leveraged leases                                   114,547        170,555
   Operating lease equipment-
        net of depreciation                           496,664        524,523
   Secured loans                                      257,098        180,331
   Investment in joint ventures                       566,754        549,596
   Assets held for sale or lease                       21,304         15,398
   Other investments                                   73,833         52,690
   Investment in future residuals                      19,329         19,693
   Allowance for losses on investments               (122,880)      (121,576)
                                                   -----------   ------------
          Total investments                         1,942,236      2,057,734
                                                   -----------   ------------

Due from GATX Corporation                              20,307         35,904
Other assets                                          146,056        161,515
                                                   -----------   -----------
TOTAL ASSETS                                      $ 2,151,111    $ 2,317,143
                                                   ===========   ============

LIABILITIES AND STOCKHOLDER'S EQUITY:

Accrued interest                                  $    27,089    $    16,070
Accounts payable and other liabilities                142,897        167,825
Debt financing:
   Commercial paper and bankers' acceptances           14,500        127,832    
   Notes Payable                                       46,620         74,161
   Obligations under capital leases                     8,633          9,754
   Senior term notes                                1,061,600      1,155,600 
                                                  ------------    ----------
          Total debt financing                      1,131,353      1,367,347
                                                  ------------    ----------

Nonrecourse obligations                               369,950        329,820
Deferred income                                        10,479         13,556
Deferred income taxes                                  74,340         55,600
   
Stockholder's equity:
   Convertible preferred stock, par value $1,         125,000        125,000
       and additional paid-in capital
   Common stock, par value $1, and
       additional paid-in capital                      28,960         28,960
   Reinvested earnings                                242,363        212,750
   Accumulated other comprehensive income:
    Foreign currency translation adjustment            (5,510)        (4,404)
    Unrealized gain on available-for-sale securities    4,190          4,619
                                                 -------------    ----------
     Total accumulated other comprehensive income      (1,320)           215
                                                 -------------    ----------
             Total stockholder's equity               395,003        366,925
                                                 -------------    ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY        $ 2,151,111    $ 2,317,143
                                                 =============   =========== 

                                               
                                       2
GATX CAPITAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                            Nine Months Ended
                                                               September 30,
                                                           1998           1997
                                                        ----------    ---------
                                                              (Unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                               $ 52,871     $ 47,737
Reconciliation of net income to net cash flows 
provided by operating activities:
   Provision for losses on investments                      7,775        9,531
   Depreciation expense                                    72,306       56,448
   Provision for deferred income taxes (benefits)          20,976       (3,443)
   Gain on sale of assets                                 (53,337)     (63,792)
   Changes in assets and liabilities:
      Other assets                                         13,422      (15,656)
      Due from GATX Corporation                            15,597       29,771  
      Accrued interest, accounts payable
       and other liabilities                              (13,909)       8,068
      Deferred income                                      (3,077)         756
   Other - net                                            (20,733)      (3,055)
                                                        ----------     --------
Net cash flows provided by operating activities            91,891       66,365
                                                        ----------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:

Investments in leased equipment, net of
       nonrecourse borrowings for leveraged leases       (256,756)    (438,825)
Loans extended to borrowers                              (134,782)     (28,628)
Other investments                                         (94,662)    (110,536)
                                                        ----------    ---------
   Total investments                                     (486,200)    (577,989)
                                                        ----------    ---------
Lease rents received, net of earned income and
        leveraged lease nonrecourse debt service          119,517       82,293
Loan principal received                                   283,623       51,424
Proceeds from sale of assets                              144,407      201,931
Joint venture investment recovery, net of earned income    46,406       30,531
                                                       -----------    ---------
   Recovery of investments                                593,953      366,179
                                                       -----------    ---------
Net cash flows provided by (used in)
investing activities                                      107,753     (211,810)
                                                       -----------    ---------
                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from nonrecourse obligations                     152,651      130,095  
Repayment of senior term notes                            (94,000)    (130,000) 
Repayment of nonrecourse obligations                     (112,521)     (81,304)
Net (decrease) increase in short-term borrowings         (140,873)     285,617
Dividends paid to stockholder                             (23,258)     (20,038)
Other financing activities                                 (1,121)      (2,273)
                                                       -----------    ---------
Net cash flows (used in) provided by financing activities(219,122)     182,097
                                                       -----------    ---------
Net (decrease) increase in cash and cash equivalents      (19,478)       36,652
Cash and cash equivalents at beginning of period           61,990       18,482  
                                                       -----------   ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $  42,512    $  55,134
                                                        ==========   ========== 

                                      3
PART I.  FINANCIAL INFORMATION
Item 1.    Financial Statements, continued

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997

1.   The  consolidated  balance  sheet  of  GATX  Capital  Corporation  and  its
     subsidiaries  ("the  Company")  at December  31, 1997 was derived  from the
     audited financial statements at that date. All other consolidated financial
     statements are unaudited and include all  adjustments,  consisting  only of
     normal recurring items,  which  management  considers  necessary for a fair
     statement of the consolidated  results of operations and financial position
     for and as of the end of the indicated  periods.  Operating results for the
     nine-month  period ended September 30, 1998 are not necessarily  indicative
     of the results that may be achieved for the entire year.

2.   Certain  prior year  amounts  have been  reclassified  to conform to
     current presentation.

3.   The Company is engaged in various  matters of litigation and has unresolved
     claims pending.  In one matter, the Company,  through an affiliate,  is the
     subject of both litigation and unasserted  claims related to the conversion
     of certain  aircraft from passenger to freighter  configuration.  While the
     amounts  claimed in this  matter and other  matters  are  substantial,  the
     ultimate liability with respect to such claims cannot be determined at this
     time. It is the opinion of management that damages,  if any, required to be
     paid by the Company in the  discharge  of such matters are not likely to be
     material to the Company's financial position or results of operations.

4.   As of  January  1, 1998,  the  Company  adopted  Statement  130,  Reporting
     Comprehensive Income. Statement 130 establishes new rules for the reporting
     and  display of  comprehensive  income  and its  components;  however,  the
     adoption of this  Statement  had no impact on the  Company's  net income or
     stockholder's equity.  Statement 130 requires unrealized gains or losses on
     the   Company's   available-for-sale   securities   and  foreign   currency
     translation  adjustments,  which prior to adoption were reported separately
     in  stockholder's  equity,  to be included in other  comprehensive  income.
     Prior year financial  statements  have been  reclassified to conform to the
     requirements of Statement 130.

     During the nine months ended  September  30, 1998 and  September  30, 1997,
     respectively,  total  comprehensive  income  amounted to $51.3  million and
     $46.2 million.

5.   In June 1998, the Financial Accounting Standards Board issued Statement No.
     133, Accounting for Derivative Instruments and Hedging Activities, which is
     required to be adopted in years  beginning after June 15, 1999. The Company
     has not yet  determined  what effect the adoption of SFAS No. 133 will have
     on its financial position and results of operations.

                                        4
PART I.  FINANCIAL INFORMATION, continued
Item 2.   Management's Discussion and Analysis

RESULTS OF OPERATIONS

Net income  during  the nine  months  ended  September  30,  1998 was $52.9
million  compared to $47.7 million  during the same period in 1997.  Income from
investments  was greater during 1998,  mainly due to larger  average  investment
balances.  This increase in investment income was partially offset by a decrease
in income from the Company's technology equipment sales and service activities.

Net income  earned  during the three months ended  September  30, 1998 was $17.7
million compared to $11.8 million in the third quarter of 1997. This increase in
income  is  primarily  due to  one-time  expenses  incurred  by the  Company  in
connection  with two  significant  events  in the  third  quarter  of 1997:  the
acquisition  of the 20% of Sun  Financial  Group,  Inc. not already owned by the
Company and the purchase of a portfolio  of leased  assets owned by Pitney Bowes
Credit  Corporation.  Increases in revenue  related to the remarketing of assets
and in gross margins on technology equipment sales and services also contributed
to this increase.

Overview
--------
The  Company  engages in two main  activities:  (1) it is  actively  involved in
asset-based  investment  and generates  income by financing  equipment  (through
lease, loan and joint venture  investments);  by remarketing assets; by managing
the  equipment  related  investment  portfolios  of others;  and by brokering or
arranging asset financing transactions,  all of which are intertwined and (2) it
provides a wide range of technology  services enabling its customers to acquire,
construct and finance information networks. Sales and service revenue related to
the Company's  technology solutions business is included in technology equipment
sales and service revenue.  Revenue earned from financing  related to technology
solutions is included in the investment and asset management revenue line.

Revenues
--------
Investment and asset management revenue increased $8.7 million and $39.3 million
during the three and nine-month periods ended September 30, 1998,  respectively,
compared to the same  periods in 1997.  Revenue  generated  from higher  average
investment  balances during 1998 was the most  significant  contributor to these
increases.  Total average  investments were  approximately  $236.7 million (13%)
greater  during the nine months  ended  September  30, 1998 than during the same
period in 1997.

Asset  remarketing  income,  a  component  of  investment  and asset  management
revenue,  includes  gains  on sales  of  Company  owned  assets  and fee  income
(including  residual shares)  generated from providing  remarketing  services to
third parties,  including the equipment related investment portfolios managed by
the Company. Asset remarketing income was a significant contributor to income in
both the first nine months of 1998 ($76.1  million) and the first nine months of
1997  ($76.8  million).   Although  it  has  historically   been  a  significant
contributor to income,  income from asset remarketing  opportunities,  which are
realized  at  lease  end or in  response  to  specific  market  conditions,  can
fluctuate significantly depending on market conditions.

Technology  equipment  sales and service  revenue was $5.1 million higher during
the quarter than during the third quarter of 1997 and $14.6 million lower during
the first  nine  months  of 1998 than  during  the  first  nine  months of 1997.
Although  revenues  were lower  during the first three  quarters of 1998,  gross
margins  improved  since the  decrease  in  revenues  was more than  offset by a
decrease in cost of  technology  equipment  sales and service.  The  information
technology  business,   particularly  the  market  for  communications   network
technology,  is  experiencing  and will  continue to  experience a rapid pace of
change  which may have a  significant  effect on the demand for products and the
gross margins earned on sales of products.  During 1998 the Company's technology
equipment  sales and  service  activities  have been  adversely  affected by the
decline in demand for IBM legacy network protocol equipment. While the Company's

                                       5
strategy includes adding products for a broader range of network protocols, much
of its historical sales base was in these IBM related products.  Consistent with
its strategy,  beginning with the second quarter of 1998, the Company  broadened
its product  line by becoming a value added  reseller  for the products of Cisco
Systems,  Inc., the world's leading supplier of internet related  communications
technology equipment.  Sales of Cisco products did not have a significant impact
on gross margins during the quarter.
 
Expenses
--------
Higher average borrowings (to fund new investments) resulted in interest expense
being higher than last year.  Continued growth in the Company's  operating lease
portfolio  resulted in an increase in operating  lease  expense,  which includes
depreciation expense and rent expense related to off-balance sheet financing.

Selling, general and administrative expenses were lower during the third quarter
of 1998 than during the third quarter of 1997 primarily due to one-time expenses
incurred  during the third quarter of 1997 related to the acquisition of the 20%
of Sun Financial  Group,  Inc. not already owned by the Company and the purchase
of a  portfolio  of leased  assets  owned by Pitney  Bowes  Credit  Corporation.
Selling,  general and administrative  expenses were higher during the first nine
months of 1998 due primarily to higher human  resource and other  administrative
expenses  associated with 1) increased  investment and asset management business
activity  and 2) costs  incurred  to support a  technology  equipment  sales and
service  infrastructure that was larger during 1998 than during 1997. During the
third  quarter the Company  continued  its effort to more closely align the size
and nature of the technology  equipment  sales and service  infrastructure  with
current market conditions by reducing costs.

The allowance for losses  increased $1.3 million during the first nine months of
1998 as a result of a $7.8  million  provision  for losses,  write-offs  of $7.2
million and $0.7 million of recoveries of previously written off investments. At
September 30, 1998, the allowance for losses is 6.3% of  investments,  including
off-balance sheet assets and after deducting nonrecourse debt.

LIQUIDITY AND CAPITAL RESOURCES

The Company  generates cash from operations and from portfolio  proceeds and has
certain  facilities for borrowing.  In addition,  certain lease transactions are
financed by obtaining  nonrecourse  loans equal to the present  value of some or
all of the rental streams.

At September  30, 1998 the Company had borrowing  capacity  consisting of $182.0
million  remaining under its Series E shelf  registration  and $285.5 million of
unused  capacity  under its  commercial  paper and bankers'  acceptances  credit
agreements.  Two of the Company's subsidiaries also maintain various stand-alone
bank facilities.

During the first  quarter of 1998 the Company  placed the proceeds  from certain
asset sales (approximately $55.1 million) in trust with qualified intermediaries
pending the  identification  and acquisition of qualified  replacement assets in
order to  effect  like-kind  exchanges  for  federal  income  tax  purposes.  At
September  30,  1998  approximately  $18.2  million  remains  in  trust  and  is
classified as cash and cash equivalents in the accompanying balance sheet.

Also  during  the  first  quarter  of 1998  the  Company  financed  the  sale of
approximately   $173.3  million  of  direct  financing  leases  resulting  in  a
recharacterization  of the Company's investment as secured loans. The loans were
repaid  during the third  quarter of 1998,  providing  a  significant  amount of
portfolio  proceeds  which  the  Company  used  primarily  to repay  outstanding
short-term  borrowings.  

                                       6
The Company's capital structure includes both fixed and floating rate debt.
The  Company  ensures a stable  margin  over its cost of funds by  approximately
matching its fixed and floating rate  investments to its fixed and floating rate
borrowings.

At September 30, 1998, the Company had approved unfunded  transactions  totaling
approximately $876.0 million, including approximately $155.0 million expected to
fund during the remainder of 1998. Once approved for funding,  a transaction may
not be  completed  for various  reasons,  or the  investment  may be shared with
partners or sold.

YEAR 2000 READINESS

The Company  continues to address what is commonly  referred to as the Year 2000
problem.  The Company has completed an  assessment  of its critical  information
systems and is modifying and replacing its in-house  developed  software as well
as upgrading  its  vendor-supported  software so that its computer  systems will
function  properly  with  respect  to  dates in the  year  2000 and  thereafter.
Additionally,  other less  critical  information  systems have been reviewed and
corrective action is being taken where indicated.

The Company also is reviewing its operating  assets to determine any exposure to
time-sensitive controls which may be embedded in the equipment. These situations
are being  assessed on an ongoing basis and  replacement or remediation is being
undertaken where indicated.

The Company is  inquiring  of both  customers  and vendors  where the  Company's
information  systems  interface  directly  with third parties to ensure that the
interfaces and the third party systems are or will be Year 2000 compliant. Where
considered appropriate,  the Company is working directly with such third parties
to test or remediate  such systems.  The Company also  interacts  electronically
with certain  external  entities but has no means of ensuring  that they will be
Year 2000 ready. Additionally,  the Company has been inquiring of key vendors in
an effort to  establish  the  ability  of the  provider  to  deliver  product or
services on a timely basis in the year 2000.

The Company  believes it has an  effective  program in place to resolve the Year
2000 issue in a timely manner and to minimize the Company's  exposure.  If these
steps were not taken,  or are not  completed  timely,  the Year 2000 issue could
have a  significant  impact on the  operations  of the  Company.  The project is
estimated to be completed during 1999, which is prior to any anticipated  impact
on its  operating  systems.  Based on the  progress and results of the Year 2000
project thus far, the Company  believes that the Year 2000 issue should not pose
significant operational problems.  Despite such belief, the Company is preparing
a contingency  plan to address  circumstances  arising as a result of unknown or
unforeseeable system or other failures related to the Year 2000 issue. The total
Year 2000 project cost is estimated to be immaterial to the Company's results of
operations.

FORWARD LOOKING STATEMENTS

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

                                       7
PART II.  OTHER INFORMATION
Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits:

     4.  Amended and Restated Credit  Agreement dated as of July 1, 1998 between
         the Company, the Lenders listed on the signature pages thereto, and the
         Chase Manhattan Bank, as administrative agent.

     27. Financial Data Schedule

(b)  The  Company  filed no reports on Form 8-K  during the three  months  ended
     September 30, 1998.

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.

                               GATX CAPITAL CORPORATION

                               /s/ Jack Jenkins-Stark
                               -----------------------
                               Jack Jenkins-Stark
                               Senior Vice President - Finance
                                    

                               /s/ Delphine M. Regalia
                               ------------------------
                               Delphine M. Regalia
                               Vice President and Controller

November 16, 1998

                                       

                                       8