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
        June 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 August 11, 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    Six Months Ended
                                             June 30,             June 30,
                                          1998      1997      1998      1997
                                        -------   -------   --------  ---------
                                            (Unaudited)          (Unaudited)
REVENUES:

Investment and asset management      $  112,821  $ 94,508   $236,283   $205,643 
Technology equipment sales and service   39,707    54,551     74,081     93,803
                                       --------   -------   --------  ---------
                                        152,528   149,059    310,364    299,446
                                       --------   -------   --------  ---------
EXPENSES:

Interest                                 29,738    22,444     59,607     44,485
Operating leases                         33,641    28,522     66,640     55,967
Cost of technology equipment
  sales & service                        31,310    44,571     58,584     76,534 
Selling, general & administrative        29,829    26,532     57,545     52,680
Provision for losses on investments       2,250     3,775      4,500      6,025
Other                                       762     1,307      1,488      3,294
                                       --------  --------   --------  ---------
                                        127,530   127,151    248,364    238,985
                                       --------  --------   --------  ---------

Income before income taxes               24,998    21,908     62,000     60,461
                                       
Provision for income taxes               11,434     8,873     26,871     24,487
                                       --------  --------   --------  ---------

NET INCOME                               13,564    13,035     35,129     35,974

Reinvested earnings at 
  beginning of period                   227,665   202,712    212,750    185,686
Dividends paid to stockholder            (6,650)   (6,196)   (13,300)   (12,109)
                                       --------  --------   --------  ---------
                               
REINVESTED EARNINGS AT END OF PERIOD  $ 234,579 $ 209,551  $ 234,579  $ 209,551
                                      ========= ========= ==========  =========








                                      1
<PAGE>

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

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

Cash and cash equivalents                         $   112,255    $    61,990
Investments:
   Direct financing leases                            471,572        666,524
   Leveraged leases                                   142,248        170,555
   Operating lease equipment-
        net of depreciation                           517,113        524,523
   Secured loans                                      392,659        180,331
   Investment in joint ventures                       587,370        549,596
   Assets held for sale or lease                       13,094         15,398
   Other investments                                   62,736         52,690
   Investment in future residuals                      19,565         19,693
   Allowance for losses on investments               (126,317)      (121,576)
                                                   -----------   ------------
          Total investments                         2,080,040      2,057,734
                                                   -----------   ------------

Due from GATX Corporation                              29,535         35,904
Other assets                                          140,407        161,515
                                                   -----------   -----------
TOTAL ASSETS                                      $ 2,362,237    $ 2,317,143
                                                   ===========   ============

LIABILITIES AND STOCKHOLDER'S EQUITY:

Accrued interest                                  $    14,015    $    16,070
Accounts payable and other liabilities                126,016        167,825
Debt financing:
   Commercial paper and bankers' acceptances          205,800        127,832    
   Notes Payable                                      103,740         74,161
   Obligations under capital leases                     8,660          9,754
   Senior term notes                                1,061,600      1,155,600 
                                                  ------------    ----------
          Total debt financing                      1,379,800      1,367,347
                                                  ------------    ----------

Nonrecourse obligations                               377,401        329,820
Deferred income                                         9,593         13,556
Deferred income taxes                                  67,767         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
       and additional paid-in capital                  28,960         28,960
   Reinvested earnings                                234,579        212,750
   Accumulated other comprehensive income:
    Foreign currency translation adjustment            (4,938)        (4,404)
    Unrealized gain on available-for-sale securities    4,044          4,619
                                                 -------------    ----------
     Total accumulated other comprehensive income        (894)           215
                                                 -------------    ----------
             Total stockholder's equity               387,645        366,925
                                                 -------------    ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY        $ 2,362,237    $ 2,317,143
                                                 =============   =========== 


                                               
                                       2
<PAGE>

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

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                               $ 35,129     $ 35,974
Reconciliation to net cash provided by operating activities:
   Provision for losses on investments                      4,500        6,025
   Depreciation expense                                    47,322       36,382
   Provision for deferred income taxes                     14,258        2,402
   Gain on sale of assets                                 (26,671)     (40,908)
   Changes in assets and liabilities:
      Other Assets                                         19,747      (18,017)
      Due from GATX Corporation                             6,369       22,466  
      Accrued interest, accounts payable
       and other liabilities                              (43,864)      (5,124)
      Deferred income                                      (3,963)         149
   Other - net                                            (18,306)         323
                                                        ----------     --------
Net cash flows provided by operating activities            34,521       39,672
                                                        ----------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:

Investments in leased equipment, net of
       nonrecourse borrowings for leveraged leases       (135,978)    (156,225)
Loans extended to borrowers                              (105,978)     (14,864)
Other investments                                         (66,948)     (94,835)
                                                        ----------    ---------
   Total investments                                     (308,904)    (265,924)
                                                        ----------    ---------
Lease rents received, net of earned income and
        leveraged lease nonrecourse debt service           88,471       60,143
Loan principal received                                    69,746       34,472
Proceeds from sale of assets                              111,053      129,075
Joint venture investment recovery, net of earned income     8,644       18,479
                                                       -----------    ---------
   Recovery of investments                                277,914      242,169
                                                       -----------    ---------
Net cash flows used in investing activities               (30,990)     (23,755)
                                                       -----------    ---------
                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase in short-term borrowings                     107,547       97,619
Proceeds from nonrecourse obligations                     109,843       83,725  
Repayment of long-term debt                               (94,000)    (130,000) 
Repayment of nonrecourse obligations                      (62,262)     (52,869)
Dividends paid to stockholder                             (13,300)     (12,109)
Other financing activities                                 (1,094)      (2,248)
                                                       -----------    ---------
Net cash flows provided by (used in) financing activities  46,734      (15,882)
                                                       -----------    ---------
Net increase in cash and cash equivalents                  50,265           35
Cash and cash equivalents at beginning of period           61,990       18,482  
                                                       -----------   ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $ 112,255    $  18,517
                                                        ==========   ========== 



                                      3
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.   Financial Statements, continued
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
     six-month period ended June 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  and 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 liability 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 six months ended June 30, 1998 and June 30, 1997, respectively,
     total comprehensive income amounted to $34.0 million and $33.7 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  earned during the three months ended June 30, 1998 was $13.6 million
compared to $13.0 million in the second quarter of 1997 and $35.1 million during
the six months then ended  compared to $36.0  million  during the same period in
1997.  Income from  investments  was  greater  during 1998 as a result of larger
investment  balances during the first half of 1998 compared to the first half of
1997. This increase in investment  income was partially  offset by a decrease in
income from the Company's technology equipment sales and service activities.

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  $18.3  million  and $30.6
million   during  the  three  and   six-month   periods  ended  June  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
$405.6  million  (23%)  greater  during the six months  ended June 30, 1998 than
during the same period in 1997.
 
Asset remarketing income 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 half of 1998 ($49.1 million) and the first half of 1997 ($52.4
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.

The increase in revenue from  investments was partially  offset by a decrease in
technology  equipment sales and service revenue.  Technology equipment sales and
service  revenue was $14.8  million  lower  during the  quarter  than during the
second  quarter of 1997 and $19.7  million  lower  during the first half of 1998
than  during  the  first  half of 1997.  The  information  technology  business,
particularly the market for communications  network technology,  is experiencing
and will  continue  to  experience  a rapid  pace of  change  which  will have a
significant  effect  on the  demand  for  products.  During  1998 the  Company's
technology  equipment sales and service  activities have been adversely affected
by the demand for IBM legacy  network  protocol  equipment.  While the Company's
strategy includes adding products for a broader range of network protocols, much
of its historical sales base was in these IBM related products. This decrease in
revenue is largely offset by a  corresponding  decrease in cost of sales and the
Company is managing to improve  gross  margins.  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.
 

                                       5
<PAGE>

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  higher  during  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 second  quarter the Company
began to more  closely  align the size and  nature of the  technology  equipment
sales and service  infrastructure  with current  market  conditions  by reducing
costs, a process which will be completed during the remainder of 1998.

The allowance for losses  increased  during the second  quarter as there were no
significant  recoveries or write-downs  during the period. At June 30, 1998, the
allowance for losses is 6.1% 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 June 30, 1998 the Company had borrowing capacity consisting of $182.0 million
remaining  under its  Series E shelf  registration  and $64.2  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 June 30,
1998 approximately  $58.6 million is held in trust and is classified as cash and
cash equivalents in the accompanying balance sheet.

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 June 30,  1998,  the  Company had  approved  unfunded  transactions  totaling
approximately $320.0 million, including approximately $160.5 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.

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.




                                       6
<PAGE>

PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings


The Company has previously reported various lawsuits filed by and against it and
GATX/Airlog  Company  ("Airlog"),  a  general  partnership  of  which a  Company
subsidiary is a partner, concerning the conversion by Airlog of ten 747 aircraft
from  passenger  to  freighter  configuration  (the  "Affected  Aircraft").  The
litigation  arises  from the  January  1996  issuance  by the  Federal  Aviation
Administration   (the   "FAA")  of   Airworthiness   Directive   96-01-03   (the
"Airworthiness  Directive")  which had the effect of significantly  reducing the
amount of freight the Affected  Aircraft were permitted to carry. As a result of
this reduction, the Affected Aircraft became uneconomic to operate.

On June 15,  1998,  General  Electric  Capital and PALC II,  Inc.  (collectively
"GECC") filed a complaint in the United States  District  Court for the Northern
District of California  (C98-2387) against Airlog, the Company,  and others with
respect to three of the ten Affected  Aircraft.  These aircraft were modified by
subcontractors of Airlog in 1991 and 1992 with GECC's knowledge and consent.  In
the action GECC asserts that the  defendants  are liable to it under a number of
legal theories in connection with the application of the Airworthiness Directive
to the three aircraft owned by GECC. The complaint seeks unspecified damages (to
be trebled under one count of the  complaint),  loss of rental  income,  cost of
repair  and loss of value of the  aircraft,  repair  of the  aircraft,  punitive
damages and costs of suit (including attorneys' fees).

On July 24, 1998 Airlog filed an action in United States  District Court for the
Western District of Washington against the United States of America  (C98-1029).
This action is to recover  losses  suffered by Airlog as a result of the alleged
negligence of the FAA in the  development  and approval of the design to convert
the Affected Aircraft from passenger to freighter  configuration.  The complaint
seeks damages in excess of $8.3 million  representing  the expenses  incurred by
Airlog in  responding  to the  Airworthiness  Directive and legal fees and costs
incurred by Airlog in defending the litigation described above.

Consistent  with its ongoing  product  support,  Airlog has  developed a partial
weight  restoration  solution  that allows  operators  to utilize  the  Affected
Aircraft  subject  only to limited  constraints  proscribed  by the FAA.  Airlog
continues to pursue, with the apparent cooperation of each of the four operators
of the Affected Aircraft, including Evergreen, Tower, GECC and AIA, solutions to
the FAA's remaining  concerns raised in the Airworthiness  Directive.  While the
results of any litigation are impossible to predict with certainty,  the Company
believes  that each of the  foregoing  claims  is  without  merit,  and that the
Company and Airlog have adequate defenses thereto.







                                       7
<PAGE>


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

(a)     Exhibits:

        27.   Financial Data Schedule

(b)     The Company filed no reports on Form 8-K during the six months ended 
        June 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/ Michael E. Cromar
                               ---------------------  
                               Michael E. Cromar
                               Senior Vice President and Chief Financial Officer
                               Chief Accounting Officer
                                     




August 14, 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
        June 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 August 11, 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    Six Months Ended
                                             June 30,             June 30,
                                          1998      1997      1998      1997
                                        -------   -------   --------  ---------
                                            (Unaudited)          (Unaudited)
REVENUES:

Investment and asset management      $  112,821  $ 94,508   $236,283   $205,643 
Technology equipment sales and service   39,707    54,551     74,081     93,803
                                       --------   -------   --------  ---------
                                        152,528   149,059    310,364    299,446
                                       --------   -------   --------  ---------
EXPENSES:

Interest                                 29,738    22,444     59,607     44,485
Operating leases                         33,641    28,522     66,640     55,967
Cost of technology equipment
  sales & service                        31,310    44,571     58,584     76,534 
Selling, general & administrative        29,829    26,532     57,545     52,680
Provision for losses on investments       2,250     3,775      4,500      6,025
Other                                       762     1,307      1,488      3,294
                                       --------  --------   --------  ---------
                                        127,530   127,151    248,364    238,985
                                       --------  --------   --------  ---------

Income before income taxes               24,998    21,908     62,000     60,461
                                       
Provision for income taxes               11,434     8,873     26,871     24,487
                                       --------  --------   --------  ---------

NET INCOME                               13,564    13,035     35,129     35,974

Reinvested earnings at 
  beginning of period                   227,665   202,712    212,750    185,686
Dividends paid to stockholder            (6,650)   (6,196)   (13,300)   (12,109)
                                       --------  --------   --------  ---------
                               
REINVESTED EARNINGS AT END OF PERIOD  $ 234,579 $ 209,551  $ 234,579  $ 209,551
                                      ========= ========= ==========  =========

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

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

Cash and cash equivalents                         $   112,255    $    61,990
Investments:
   Direct financing leases                            471,572        666,524
   Leveraged leases                                   142,248        170,555
   Operating lease equipment-
        net of depreciation                           517,113        524,523
   Secured loans                                      392,659        180,331
   Investment in joint ventures                       587,370        549,596
   Assets held for sale or lease                       13,094         15,398
   Other investments                                   62,736         52,690
   Investment in future residuals                      19,565         19,693
   Allowance for losses on investments               (126,317)      (121,576)
                                                   -----------   ------------
          Total investments                         2,080,040      2,057,734
                                                   -----------   ------------

Due from GATX Corporation                              29,535         35,904
Other assets                                          140,407        161,515
                                                   -----------   -----------
TOTAL ASSETS                                      $ 2,362,237    $ 2,317,143
                                                   ===========   ============

LIABILITIES AND STOCKHOLDER'S EQUITY:

Accrued interest                                  $    14,015    $    16,070
Accounts payable and other liabilities                126,016        167,825
Debt financing:
   Commercial paper and bankers' acceptances          205,800        127,832    
   Notes Payable                                      103,740         74,161
   Obligations under capital leases                     8,660          9,754
   Senior term notes                                1,061,600      1,155,600 
                                                  ------------    ----------
          Total debt financing                      1,379,800      1,367,347
                                                  ------------    ----------

Nonrecourse obligations                               377,401        329,820
Deferred income                                         9,593         13,556
Deferred income taxes                                  67,767         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
       and additional paid-in capital                  28,960         28,960
   Reinvested earnings                                234,579        212,750
   Accumulated other comprehensive income:
    Foreign currency translation adjustment            (4,938)        (4,404)
    Unrealized gain on available-for-sale securities    4,044          4,619
                                                 -------------    ----------
     Total accumulated other comprehensive income        (894)           215
                                                 -------------    ----------
             Total stockholder's equity               387,645        366,925
                                                 -------------    ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY        $ 2,362,237    $ 2,317,143
                                                 =============   =========== 

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

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income                                               $ 35,129     $ 35,974
Reconciliation to net cash provided by operating activities:
   Provision for losses on investments                      4,500        6,025
   Depreciation expense                                    47,322       36,382
   Provision for deferred income taxes                     14,258        2,402
   Gain on sale of assets                                 (26,671)     (40,908)
   Changes in assets and liabilities:
      Other Assets                                         19,747      (18,017)
      Due from GATX Corporation                             6,369       22,466  
      Accrued interest, accounts payable
       and other liabilities                              (43,864)      (5,124)
      Deferred income                                      (3,963)         149
   Other - net                                            (18,306)         323
                                                        ----------     --------
Net cash flows provided by operating activities            34,521       39,672
                                                        ----------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:

Investments in leased equipment, net of
       nonrecourse borrowings for leveraged leases       (135,978)    (156,225)
Loans extended to borrowers                              (105,978)     (14,864)
Other investments                                         (66,948)     (94,835)
                                                        ----------    ---------
   Total investments                                     (308,904)    (265,924)
                                                        ----------    ---------
Lease rents received, net of earned income and
        leveraged lease nonrecourse debt service           88,471       60,143
Loan principal received                                    69,746       34,472
Proceeds from sale of assets                              111,053      129,075
Joint venture investment recovery, net of earned income     8,644       18,479
                                                       -----------    ---------
   Recovery of investments                                277,914      242,169
                                                       -----------    ---------
Net cash flows used in investing activities               (30,990)     (23,755)
                                                       -----------    ---------
                                                       
CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase in short-term borrowings                     107,547       97,619
Proceeds from nonrecourse obligations                     109,843       83,725  
Repayment of long-term debt                               (94,000)    (130,000) 
Repayment of nonrecourse obligations                      (62,262)     (52,869)
Dividends paid to stockholder                             (13,300)     (12,109)
Other financing activities                                 (1,094)      (2,248)
                                                       -----------    ---------
Net cash flows provided by (used in) financing activities  46,734      (15,882)
                                                       -----------    ---------
Net increase in cash and cash equivalents                  50,265           35
Cash and cash equivalents at beginning of period           61,990       18,482  
                                                       -----------   ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $ 112,255    $  18,517
                                                        ==========   ========== 

                                      3
PART I.  FINANCIAL INFORMATION
Item 1.   Financial Statements, continued
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
     six-month period ended June 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  and 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 liability 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 six months ended June 30, 1998 and June 30, 1997, respectively,
     total comprehensive income amounted to $34.0 million and $33.7 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  earned during the three months ended June 30, 1998 was $13.6 million
compared to $13.0 million in the second quarter of 1997 and $35.1 million during
the six months then ended  compared to $36.0  million  during the same period in
1997.  Income from  investments  was  greater  during 1998 as a result of larger
investment  balances during the first half of 1998 compared to the first half of
1997. This increase in investment  income was partially  offset by a decrease in
income from the Company's technology equipment sales and service activities.

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  $18.3  million  and $30.6
million   during  the  three  and   six-month   periods  ended  June  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
$405.6  million  (23%)  greater  during the six months  ended June 30, 1998 than
during the same period in 1997.
 
Asset remarketing income 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 half of 1998 ($49.1 million) and the first half of 1997 ($52.4
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.

The increase in revenue from  investments was partially  offset by a decrease in
technology  equipment sales and service revenue.  Technology equipment sales and
service  revenue was $14.8  million  lower  during the  quarter  than during the
second  quarter of 1997 and $19.7  million  lower  during the first half of 1998
than  during  the  first  half of 1997.  The  information  technology  business,
particularly the market for communications  network technology,  is experiencing
and will  continue  to  experience  a rapid  pace of  change  which  will have a
significant  effect  on the  demand  for  products.  During  1998 the  Company's
technology  equipment sales and service  activities have been adversely affected
by the demand for IBM legacy  network  protocol  equipment.  While the Company's
strategy includes adding products for a broader range of network protocols, much
of its historical sales base was in these IBM related products. This decrease in
revenue is largely offset by a  corresponding  decrease in cost of sales and the
Company is managing to improve  gross  margins.  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.
 

                                       5
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  higher  during  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 second  quarter the Company
began to more  closely  align the size and  nature of the  technology  equipment
sales and service  infrastructure  with current  market  conditions  by reducing
costs, a process which will be completed during the remainder of 1998.

The allowance for losses  increased  during the second  quarter as there were no
significant  recoveries or write-downs  during the period. At June 30, 1998, the
allowance for losses is 6.1% 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 June 30, 1998 the Company had borrowing capacity consisting of $182.0 million
remaining  under its  Series E shelf  registration  and $64.2  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 June 30,
1998 approximately  $58.6 million is held in trust and is classified as cash and
cash equivalents in the accompanying balance sheet.

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 June 30,  1998,  the  Company had  approved  unfunded  transactions  totaling
approximately $320.0 million, including approximately $160.5 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.

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.

                                       6
PART II.  OTHER INFORMATION
Item 1.   Legal Proceedings

The Company has previously reported various lawsuits filed by and against it and
GATX/Airlog  Company  ("Airlog"),  a  general  partnership  of  which a  Company
subsidiary is a partner, concerning the conversion by Airlog of ten 747 aircraft
from  passenger  to  freighter  configuration  (the  "Affected  Aircraft").  The
litigation  arises  from the  January  1996  issuance  by the  Federal  Aviation
Administration   (the   "FAA")  of   Airworthiness   Directive   96-01-03   (the
"Airworthiness  Directive")  which had the effect of significantly  reducing the
amount of freight the Affected  Aircraft were permitted to carry. As a result of
this reduction, the Affected Aircraft became uneconomic to operate.

On June 15,  1998,  General  Electric  Capital and PALC II,  Inc.  (collectively
"GECC") filed a complaint in the United States  District  Court for the Northern
District of California  (C98-2387) against Airlog, the Company,  and others with
respect to three of the ten Affected  Aircraft.  These aircraft were modified by
subcontractors of Airlog in 1991 and 1992 with GECC's knowledge and consent.  In
the action GECC asserts that the  defendants  are liable to it under a number of
legal theories in connection with the application of the Airworthiness Directive
to the three aircraft owned by GECC. The complaint seeks unspecified damages (to
be trebled under one count of the  complaint),  loss of rental  income,  cost of
repair  and loss of value of the  aircraft,  repair  of the  aircraft,  punitive
damages and costs of suit (including attorneys' fees).

On July 24, 1998 Airlog filed an action in United States  District Court for the
Western District of Washington against the United States of America  (C98-1029).
This action is to recover  losses  suffered by Airlog as a result of the alleged
negligence of the FAA in the  development  and approval of the design to convert
the Affected Aircraft from passenger to freighter  configuration.  The complaint
seeks damages in excess of $8.3 million  representing  the expenses  incurred by
Airlog in  responding  to the  Airworthiness  Directive and legal fees and costs
incurred by Airlog in defending the litigation described above.

Consistent  with its ongoing  product  support,  Airlog has  developed a partial
weight  restoration  solution  that allows  operators  to utilize  the  Affected
Aircraft  subject  only to limited  constraints  proscribed  by the FAA.  Airlog
continues to pursue, with the apparent cooperation of each of the four operators
of the Affected Aircraft, including Evergreen, Tower, GECC and AIA, solutions to
the FAA's remaining  concerns raised in the Airworthiness  Directive.  While the
results of any litigation are impossible to predict with certainty,  the Company
believes  that each of the  foregoing  claims  is  without  merit,  and that the
Company and Airlog have adequate defenses thereto.

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

(a)     Exhibits:

        27.   Financial Data Schedule

(b)     The Company filed no reports on Form 8-K during the six months ended 
        June 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/ Michael E. Cromar
                               ---------------------  
                               Michael E. Cromar
                               Senior Vice President and Chief Financial Officer
                               Chief Accounting Officer
                                     

August 14, 1998

                                       

                                       8