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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
____________________

Commission File Number: 0-13611

SPARTAN MOTORS, INC.
(Exact name of Registrant as Specified in its Charter)

MICHIGAN 38-2078923
(State of Incorporation) (I.R.S. Employer Identification No.)

1000 REYNOLDS ROAD
CHARLOTTE, MICHIGAN 48813
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code: (517) 543-6400

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

Common Stock, $.01 Par Value
(Title of Class)

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

Yes __X__ No _____

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

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the date of filing.

Aggregate Market Value as of March 14, 1997: $85,002,995

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

Common Stock, $.01 par value, outstanding as of March 14, 1997: 12,364,072
shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for its June 5, 1997, annual
meeting of shareholders are incorporated by reference in Part III.
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PART I

ITEM 1. BUSINESS.

GENERAL

Spartan Motors, Inc. ("Spartan" or the "Company") is a Michigan
corporation organized on September 18, 1975, and is headquartered in
Charlotte, Michigan. The Company began development of its first product
that same year and shipped its first truck chassis in October 1975.

Spartan is a leading designer, engineer and manufacturer of custom
heavy-duty chassis. The Company's chassis consist of a frame assembly,
engine, transmission, electrical systems, running gear (wheels, tires,
axles, suspension and brakes) and, for some applications, a cab. The
Company's customers are original equipment manufacturers ("OEMs") who
complete their vehicle product by mounting the body or apparatus on a
Spartan chassis.

The Company's business strategy is to further diversify its product
lines and develop its design, engineering and manufacturing expertise to be
the best value producer of custom chassis to national and international
markets. The Company sells its chassis to four principal markets: fire
truck, motorhome, school and transit bus and specialty. Spartan focuses on
certain custom niches within its four principal markets and believes that
opportunities for growth remain for custom built chassis in each of its
principal markets.

The Company recognizes that annual unit sales of motorhome chassis
historically have been substantially greater than fire truck, bus and
specialty chassis. Thus, in the past 24 months the Company's management
has placed special emphasis on further diversification into the school bus,
transit bus and specialty chassis markets.

Spartan manufactures its chassis with commercially available
components purchased from outside suppliers. This purchasing strategy
allows the Company to service finished products with more ease, reduce
production costs and expedite the development of new products. The Company
manufactures chassis only upon receipt of confirmed orders, thus, it does
not have significant amounts of completed product inventory.

The Company prides itself on the "Spartan" method of conducting
business, which features frugality, limited corporate bureaucracy and
proactive employee involvement. The Company believes that it can best
carry out its long-term business plan and obtain optimal financial
flexibility by using internally or externally generated equity capital as
its primary source of expansion capital.

PRODUCTS

The Company has extensive engineering experience in creating chassis
for vehicles that perform specialized tasks. The Company engineers,
manufactures and markets chassis for fire trucks, motorhomes, school buses,
transit buses and specialty applications such as airport sweepers, utility
trucks and crash-rescue apparatus. As a specialized chassis producer, the
Company believes that it holds a unique position, due to its engineering
reaction time, manufacturing expertise and flexibility, to profitably
manufacture chassis with a specialized design that will serve customer
needs better than standard commercial chassis.

FIRE TRUCKS

The Company custom manufactures fire truck chassis and cabs in
response to customer specifications. These specifications vary based on
such factors as application, terrain, street configuration and the nature
of the community, state or country in which the fire truck will be
utilized.

Spartan strives to develop innovative engineering solutions to meet
customer requirements, and concentrates on anticipating the needs of the
marketplace. An example of this progressive approach is the Company's
introduction of the ADVANTAGE fire truck chassis and cab in the first
quarter of 1996. The Company engineered this entry level product to
directly compete with the $80 million commercial fire truck chassis market.
The ADVANTAGE fire truck chassis and cab is competitively priced without
sacrificing the added flexibility, quality and end-user orientation of a
custom-built fire truck.

In the fire apparatus market, Spartan manufactured the ADVANTAGE,
Metro Star, Gladiator, Charger, Silent Knight and Baron custom chassis for
over 45 OEMs in 1996.

Spartan monitors new technology and works closely with component
manufacturers to apply this technology to the Company's products. For
example, the Company helped introduce the Detroit Diesel Series 60 engine
to the fire truck market, which is used on many heavy-duty commercial
applications. These engines permit the fire truck to have larger cab
interiors because the pistons are configured in a straight line rather than
in a V-shape. The Company also worked with Cummins on the introduction of
the N-14 and M-11 engines, which assist in attaining higher emission
standards through charged air-cooled diesel engines. The Company also
implemented the MD series and HD series Allison World Transmission, an
improved wholly electronic automatic transmission design that provides
better performance characteristics and improved service and maintenance
capabilities.

-2-

The Company currently believes that the percentage of fire trucks
manufactured with customized chassis will continue to increase, primarily
because customized chassis respond to customers' demands for increased
safety features and offer more options and specific configurations as
compared to standard commercial fire trucks.

Safety standards for fire trucks are adopted by the National Fire
Protection Association ("NFPA"), which announced comprehensive new
standards for the fire apparatus industry in February of 1996. NFPA
standards typically add new requirements that are intended to increase the
safety of fire fighters. Past NFPA standards have included the total
enclosure of all crew seating areas, the establishment of maximum stepping
heights on the apparatus and the provision of access hand rails. Although
NFPA standards are not mandatory, past standards have significantly
impacted fire truck purchasing decisions.

MOTORHOMES

The Company custom manufactures chassis to the individual
specifications of its motorhome chassis OEMs, which vary based on the
specific interior and exterior designs of the motorhome coaches to be
attached to the Spartan chassis. The Company's motorhome chassis are
separated into three major product series: (i) the Alpine series chassis;
(ii) the Highlander series chassis; and (iii) the Mountain Master series
chassis. These motorhome chassis are distinguished by differences in
allowable vehicle weight, length, size, engines, options and price. The
Company designs and engineers modifications to these three basic product
groups to meet customer requirements and to adapt the chassis to each
customer's manufacturing process.

Spartan seeks to develop innovative engineering solutions to customer
requirements and strives to anticipate future market needs. Examples of
this progressive Spartan approach were the 1996 introduction of the new
Spartan/Granning industry first, Independent Front Suspension ("IFS"). IFS
places the air bags as close to the wheel as possible utilizing full air
suspension cushions and a constant axle centerline, thus creating a
superior ride, improved handling and greater stability. In addition the
IFS reduces oversteer and understeer, brake dive and wheel-to-wheel
transfer of road shock to passengers and the RV body, which current truck-
type suspensions cannot prevent. In 1996, the Company also introduced a
state-of-the-art automotive style Eurotech 2000 RV electrical system,
Spartan Soft Touch steering wheel which absorbs vibration and features
strategically placed nodes and thumb pads adding to the driver's comfort
level.

Further examples of Spartan's innovative engineering include the
implementation of a wide track axle, which provides better handling and
greater stability, and a Spartan-exclusive "intelligent steering wheel"
system, which provides fingertip control of many RV functions from the
wheel of the vehicle.
-3-

Spartan's three major motorhome product groups are as follows:

The ALPINE SERIES CHASSIS was designed and engineered to offer a
luxurious ride at a great price. The Alpine chassis has a standard gross
vehicle weight ("GVW") of 18,500 lbs., which can be upgraded to 25,000 lbs.
The chassis is powered by the Cummins turbo-diesel 210 h.p., 5.9 B-Series
engine with 485 ft./lbs. of torque, or the optional Cummins C8.3 liter,
250 h.p. engine with 650 ft./lbs. of torque, coupled with the Allison AT-542,
four-speed transmission with a 3.23 powertrain gear ratio, or the
optional Allison MD-3060 six-speed transmission and two overdrive gears.
Full air suspension, air brakes, the Leece-Neville 160 amp alternator and
50,000 per square inch ("PSI") frame rail are all standard features.

The Alpine series chassis combines a number of the features of today's
deluxe models with the lower cost of basic models, allowing OEMs to offer a
complete, well-appointed coach for entry level premium coach buyers. The
Alpine chassis demonstrates Spartan's commitment to providing customers
with quality, high-powered products at competitive prices.

The HIGHLANDER SERIES CHASSIS provides additional power, premium
performance and a luxurious ride by offering more standard features than
the Alpine series chassis. This chassis series is customized to suit the
specific needs of OEMs who build motorhomes for the intermediate luxury
marketplace.

The Highlander series chassis features Cummins 275 h.p., C8.3 engine,
660 ft./lbs. of torque, with the option of up to a 325 h.p., Cummins C-Series
diesel pusher engine with 915 ft./lbs. of torque. The Spartan
V.E.R.S.T. air suspension and air brakes, Allison MD-3060 six-speed
electronic transmission, 50,000 PSI laser aligned frame rails, anti-lock
braking system and GVW from 25,000 lbs. to 28,500 lbs. are all standard
features of the Highlander series chassis.

The MOUNTAIN MASTER SERIES CHASSIS was designed to meet the specific
performance and luxury needs of deluxe motorhome customers throughout North
America.

The Mountain Master chassis series features the Cummins state-of-the-
art C8.3, 250 h.p. diesel pusher engine coupled with the Allison MD-3060,
six-speed electronic transmission. The Mountain Master can be upgraded up
to the state-of-the-art Cummins electronically controlled 450 h.p. M-11
diesel pusher engine, full air suspension and air brakes, the Spartan-
exclusive intelligent steering wheel, 50,000 PSI laser aligned frame
rails, anti-lock braking system and GVW from 26,000 lbs. to 43,000 lbs.

The Company believes that the Mountain Master series chassis has set
the industry standard for luxury and performance in premium motorhomes.

-4-

TRANSIT AND SCHOOL BUS/CHASSIS

Consistent with its focus on the future, the Company made significant
strides toward product diversification in 1996. These diversification
efforts were specifically placed on expanding Spartan's share in the
transit bus and school bus chassis marketplace. The expanding school bus
chassis market, coupled with a growing market for the Company's custom
transit bus chassis, creates an excellent opportunity to further the
diversification of other transit bus products. Spartan currently believes
that the transit bus market continues to show encouraging growth for custom
chassis manufacturing companies as the market recognizes the long-term cost
savings related to maintenance and the extended life cycle of a custom bus,
as well as the need to place safety as a top priority. The Company
believes that medium to small cities and private contractors are moving
toward smaller, speciality type buses such as the ones produced on Spartan
chassis. The move to smaller specialty buses is evidenced by the growth in
major bus companies that have begun to build buses on custom Spartan
chassis, which has increased from one OEM in 1995 to six OEMs by mid-year
1996. The custom bus chassis also can be adapted for use in small and
midsize buses under 32 feet in length.

Spartan's innovative custom low floor bus chassis, first delivered
to an OEM in the second half of 1995, eliminates the need for costly
mechanical wheel chair lifts through a revolutionary curb height that
permits the use of manually operated ramps. Spartan's low floor chassis
allows OEMs to meet Americans with Disabilities Act standards, which
require lifts on all publicly funded buses, on a very competitive basis.

The Company currently expects that its domestic bus vehicle market will
continue to grow due to American consumers' increasing demands for improved
mobile services and increasing concern over safety issues--two areas that
are specifically addressed through the use of custom chassis.

Potential customers outside of the United States, in areas where bus
transportation is used to a greater extent than domestically, continue to
show significant interest in the Company's custom bus chassis. The
Company's ability to readily convert the bus chassis from left-hand to
right-hand steering and the use of components which are serviceable
throughout the world should enable this product to continue its growth in
the international marketplace.

SPECIALTY VEHICLE CHASSIS

The Company continues to develop specialized chassis and actively
seeks additional applications of its existing products and technology in
the specialty vehicle market. Spartan believes that this specialty product
group, the Company's smallest, continues to have strong sales growth
potential in the world marketplace. With its experience in manufacturing

-5-

chassis for bookmobiles, mobile medical units and other specialty uses, the
Company believes it is well positioned to continue to benefit and flourish
in this market.

SPARTAN DE MEXICO S.A. DE C.V.

Spartan de Mexico S.A. de C.V. ("Spartan de Mexico"), the Company's
wholly-owned subsidiary in Queretaro, Mexico, was established in January
1993. Spartan de Mexico produced 81 transit bus chassis during 1994. The
Company halted production in 1995 due to the faltering Mexican economy that
affected the demand for transit bus chassis. Spartan de Mexico recognized
a $.05 per share loss in 1995 and a $.08 per share loss in 1994. During
1996, Spartan de Mexico incurred losses of $1.2 million. To minimize
future negative impacts on the Company, in December 1996, management
determined to close the Spartan de Mexico facility. For a description of
the effect of this closure, see Note 16 to the Consolidated Financial
Statements in this Form 10-K.

CUSTOMER BASE

In 1996, the Company's customer base included two major customers.
Sales to Fleetwood Motor Homes of Indiana, Inc. ("Fleetwood") were
approximately $32.8 million and sales to Newmar Corp. ("Newmar") were
approximately $23.5 million in 1996. These numbers compare to sales of
approximately $19.7 million to Fleetwood, $19.4 million to Newmar and $15.3
million to a third major customer in 1995 and approximately $27.5 million
to Fleetwood, $22.1 million to Newmar and $19.1 million to a third major
customer in 1994. Sales to customers classified as major amounted to 32%,
35.3% and 35.8% of total revenues in 1996, 1995 and 1994, respectively.
Although the loss of a major customer potentially could have a material
adverse effect on the Company and its future operating results, the Company
believes that it has developed strong relationships with its customers.

BACKLOG ORDERS

At December 31, 1996, the Company had backlog orders of approximately
$68 million compared with a backlog of approximately $62.1 million at
December 31, 1995.

Although the backlog of unfilled orders is one of many indicators of
market demand, several factors, such as changes in production rates,
available capacity, new product introductions and competitive pricing
actions, may affect actual sales. Accordingly, a comparison of backlog
from period to period is not necessarily instructive and may not be
indicative of eventual actual shipments.

-6-

MARKETING

Spartan markets its custom manufactured chassis primarily through the
direct contact of its sales department with OEMs, dealers and end-users.
These personal contacts focus on the quality of the Company's custom
products and allow the Company to keep customers updated on new or improved
product lines.

In 1996, Company representatives attended over 80 trade shows, rallies
and expositions to promote its custom chassis products. The Company
currently expects to continue its participation in trade shows throughout
North America in 1997. Trade shows provide Spartan the opportunity to
display its chassis and to meet directly with OEMs who purchase chassis,
dealers who sell finished vehicles and consumers who buy the finished
product. In 1996 the Company also attended trade shows in Canada and Europe
for the purpose of introducing, promoting and expanding the Spartan chassis
product lines into international markets.

The Company introduced several new products through trade shows in
1996, including the new IFS system for the premium motorhome market, the
ADVANTAGE fire truck chassis engineered to compete directly with the
commercial marketplace, the new rear engine full air suspension school bus
chassis and the heavy duty front discharge concrete mixer chassis.
Spartan's sales, marketing and communication groups are responsible for
marketing the Company's custom manufactured chassis and producing product
literature. The sales group consists of approximately 10 salespersons
based in Charlotte, Michigan, and seven salespersons located throughout the
United States and Canada. In addition, the Company has retained sales
representatives in London in an effort to increase penetration in this
international market. All sales personnel are supported by the Company's
sales and management staff based in Charlotte, Michigan.

SUPPLIERS

An important strategy in the Company's product development has been
its ability to purchase quality sub-assemblies and parts from some of the
leading automotive parts suppliers in the country. Major component
suppliers include Rockwell International, Inc., Detroit Diesel, Inc.,
Cummins Engine Co., Allison Division of General Motors Corporation, Truck
Cab Manufacturing, Eaton Axle Corporation, REYCO Industries, Inc., Navistar
International, Granning Suspensions and Goodyear Tire and Rubber Co. The
Company is able to reduce production costs due to its high volume
purchasing power with these component suppliers.

The Company is located close to most of its suppliers, which is an
important factor when planning for deliveries and controlling inventories
of components. Spartan has enjoyed long-term business relationships with
many manufacturers and suppliers; however, the Company is not a party to
any long-term supply contracts.

-7-

MANUFACTURING

In 1995, the Company consolidated Plant III, a plant that initially
housed RV chassis manufacturing, into Plant IV, which enabled the Company
to fully utilize its largest manufacturing plant. The consolidation
improved production efficiencies through reduced employee overtime,
improved quality and diminished inventory by eliminating the need for
stocking two locations with identical parts.

Early in 1996, the Company completed similar efficiency improvement
changes to the fire truck production assembly lines. The primary lines in
Plant I were moved to Plant III, which is located next to fire truck cab
assembly in Plant II, and in the same building as fire truck engineering.
The relocation resulted in reduced down time through improved
communications between the engineering and production staff on the
customized product line. The relocation also allowed the Company to
provide longer assembly lines with higher ceilings to improve the
production efficiencies on these typically larger custom units that include
cabs.

The Company's three principal assembly areas are fire truck and
specialty vehicle assembly, cab painting and assembly and motorhome and bus
chassis assembly. In each of these areas, the Company utilizes a series of
workstations. Due to the custom nature of its business, Spartan chassis
cannot be manufactured efficiently on automated assembly lines. Employees
who are assigned to a particular workstation typically perform a variety of
tasks to complete the objective assigned to that station. For example, a
worker assigned to a cab/engine set workstation might perform a variety of
tasks relating to the mounting of the engine, cab, radiator, transmission
and the connection of electrical and plumbing systems. In addition,
workers frequently are trained to work at more than one workstation, which
increases the Company's manufacturing flexibility, improves manpower
utilization and decreases production overhead.

Generally, Spartan designs and assembles specialized heavy-duty truck
chassis using commercially available components purchased from outside
suppliers rather than producing components internally. This approach
facilitates prompt serviceability of finished products, reduces production
costs and expedites the development of new products.

Spartan conducts quality control audits throughout the manufacturing
process to ensure that its products meet Spartan quality standards and
customer specifications. In addition, all chassis are evaluated utilizing
performance tests before shipment to OEMs. For example, prior to shipment
to OEMs, each fire truck chassis is subjected to a 60-mile road and
durability test and every motorhome chassis is tested on a chassis
dynamometer, which operates power train components at conditions simulating
road speeds.

-8-

PRODUCT WARRANTIES

Spartan provides limited warranties against construction defects.
These warranties generally provide for the replacement or repair of
defective parts or workmanship for a specified period following the date of
sale. Customers and end-users also may receive limited warranties from
suppliers of components that are incorporated into the Company's chassis.

RESEARCH AND DEVELOPMENT

Spartan's success depends on the Company's ability to respond quickly
to changing market demands. Spartan emphasizes research and development
and commits significant resources to develop and adapt new production
techniques. Spartan devotes a portion of its Plant IV facilities to
research and development projects, which focus on implementing the latest
technology from component manufacturers into existing products and
manufacturing prototypes of new product lines. See "Manufacturing."

COMPETITION

The principal methods of competition utilized by the Company include
design, product and service quality, speed of delivery and product pricing.
The Company competes with companies that manufacture custom chassis for
similar markets, some of which are divisions of large diversified
organizations that have total sales and financial resources exceeding those
of the Company. Certain competitors are vertically integrated and
manufacture their own commercial chassis, although they generally do not
sell chassis to outside customers.

The Company's direct competitors in the specialty chassis market are
principally smaller manufacturers. Larger truck chassis manufacturers
generally have not shown an interest in manufacturing custom designed
heavy-duty truck chassis because their highly automated assembly line
operations do not efficiently lend themselves to producing a wide variety
of highly specialized truck and vehicle chassis at acceptable profit
margins. In 1995 and 1996, Spartan produced chassis for three companies
that have their own chassis manufacturing facilities.

Because of the lack of reliable published statistics, the Company is
unable to state with certainty its position in the chassis market. The
market share in the chassis market is fragmented and the Company believes
that no one company has a dominant market position.

PATENTS, TRADEMARKS, LICENSES AND FRANCHISES

In 1996, the Company had no patents or franchises material to its
business. The Company has two trademarks, one registered in the United
States and one in Mexico. The United States trademark, registration number
1,788,064, became effective August 17, 1993, and will remain in effect

-9-

until August 17, 2003. The Mexican trademark, registration number 436,937,
became effective October 2, 1992, and will remain in effect until October
2, 2002. Both of the registered trademarks are of the Spartan insignia and
limit the right of use exclusively to the Company.

The Company believes that is products are identified by the Company's
trademarks and that its trademarks are valuable assets. The Company is not
aware of any infringing uses or any prior claims of ownership of its
trademarks that could materially affect its business.

On March 4, 1994, the Company entered into two four-year agreements
with General Motors Corporation's North American Truck Group and Chevrolet
Motor Division ("General Motors"), which enables the companies to share
resources for building and marketing motorhome chassis. The first
agreement provides General Motors a license to manufacture, market and sell
the former Discovery/1K motorhome chassis through the Chevrolet Motor
Division as a P-72 model. The second agreement calls for Spartan to design
and build a rear engine diesel chassis known as the P-92 at its Charlotte,
Michigan headquarters.

ENVIRONMENTAL MATTERS

Compliance with federal, state and local environmental laws and
regulations has not had, nor is it expected to have, a material effect on
the capital expenditures, earnings or competitive position of the Company.

EMPLOYEES

The Company employed 490 full-time employees as of December 31, 1996.
The Company's employees do not belong to a collective bargaining unit and
management presently considers its relations with employees to be positive.

ITEM 2. PROPERTIES.

The following table sets forth certain information concerning the
properties owned by the Company. Management of the Company believes that
the currently owned facilities are adequate to meet its requirements for
the foreseeable future.

-10-

APPROX.
SIZE
USED BY LOCATION USE (SQ. FEET)
------- -------- --- ----------

Spartan Motors, Inc. Plant I - 1000 Reynolds Road Headquarters, 51,000
Charlotte, Michigan Manufacturing
and Warehousing

Spartan Motors, Inc. Plant. II - 1165 Reynolds Road Manufacturing, 44,000
Charlotte, Michigan Sales and Marketing

Spartan Motors, Inc. Plant. III - 1580 Mikesell Street Engineering 50,000
Charlotte, Michigan and Manufacturing

Spartan Motors, Inc. Plant VI - 1549 Mikesell Street Manufacturing, 140,000
Charlotte, Michigan Receiving, Service
Parts, Customer
Service, Research &
Development and
Warehousing

Spartan de Mexico Acceso III S-N, Manufacturing and 100,000
S.A. de C.V. Queretaro, Mexico Warehousing

Collateral for various Company obligations to banks. See Note 7 to the Consolidated Financial
Statements in this Form 10-K.

ITEM 3. LEGAL PROCEEDINGS.

At December 31, 1996, the Company and its subsidiaries were parties,
both as plaintiff or defendant, to a number of lawsuits and claims
arising out of the normal conduct of their business. In the opinion of
management, the financial position of the Company will not be materially
affected by the final outcome of these legal proceedings.

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

During the fourth quarter of 1996, no matters were submitted to a vote
of security holders, through the solicitation of proxies or otherwise.

-11-

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.

Spartan's Common Stock is traded on The Nasdaq Stock Market under the
symbol "SPAR."

Since 1992, the Board of Directors has authorized management to
repurchase up to a total of 1.4 million shares of its common stock in open
market transactions. Management repurchased 900,000 shares through
December 31, 1996. Repurchase of common stock is contingent upon market
conditions. The Company has not set an expiration date for the completion
of the repurchase program. The treasury stock has been constructively
retired in accordance with the Michigan Business Corporation Act.

The following table sets forth the high and low sale prices for the
Company's common stock for the periods indicated, all as reported by The
Nasdaq Stock Market:

HIGH LOW
---- ----

Year Ended December 31, 1996:
First Quarter . . . . . . . . . . . . . . . . . $11.00 $7.25
Second Quarter. . . . . . . . . . . . . . . . . 8.87 7.125
Third Quarter . . . . . . . . . . . . . . . . . 8.00 6.375
Fourth Quarter. . . . . . . . . . . . . . . . . 7.75 6.25

Year Ended December 31, 1995:
First Quarter . . . . . . . . . . . . . . . . . $14.625 $9.75
Second Quarter. . . . . . . . . . . . . . . . . 11.375 8.625
Third Quarter . . . . . . . . . . . . . . . . . 11.625 8.75
Fourth Quarter. . . . . . . . . . . . . . . . . 11.625 9.25

The Company declared a cash dividend of $.05 per outstanding share on
February 27, 1996 and May 8, 1995, to shareholders of record on March 27,
1996 and June 8, 1995.

The number of shareholders of record of the Company's common stock on
March 14, 1997 was 1,053.

-12-

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data shown below for the Company for each of
the five years in the period ended December 31, 1996, has been derived from
Consolidated Financial Statements of the Company, which have been audited
by the Company's independent auditors, Deloitte & Touche LLP. The
following data should be read in conjunction with the Consolidated
Financial Statements and related notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in
this Form 10-K. Net earnings per share, cash dividends per common share
and the weighted average of common shares outstanding have been adjusted
for all periods presented to reflect the Company's three-for-two stock
split effected June 30, 1993.

FIVE-YEAR OPERATING AND FINANCIAL SUMMARY
-----------------------------------------------------------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----

INCOME STATEMENT DATA:
Revenues $175,826 $154,082 $191,526 $166,703 $124,031
Costs and expenses:
Cost of products sold 148,629 131,809 158,390 139,012 100,884
Research and development 4,194 3,135 3,002 1,986 1,579
Selling, general and administrative 14,264 13,252 13,127 9,486 7,685
Interest 464 459 488 452 205
Loss on closure of Mexican
subsidiary 4,423 -- -- -- --
-------- -------- -------- -------- --------
Total costs and expenses 171,974 148,655 175,007 150,936 110,353

Earnings before taxes on income
and minority interest 3,852 5,427 16,519 15,767 13,678
Taxes on income 1,532 2,000 5,906 5,367 4,464
-------- -------- -------- -------- --------
Earnings before minority interest 2,320 3,427 10,613 10,400 9,214
Minority interest in loss of
consolidated subsidiary -- -- -- 97 --
-------- -------- -------- -------- --------
Net earnings $ 2,320 $ 3,427 $ 10,613 $ 10,497 $ 9,214
======== ======== ======== ======== ========
Net earnings per share $ 0.18 $ 0.27 $ 0.80 $ 0.80 $ 0.72
======== ======== ======== ======== ========
Cash dividends per common share $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.03
======== ======== ======== ======== ========
Weighted average common shares
outstanding 12,541 12,887 13,203 13,185 12,822
======== ======== ======== ======== ========
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BALANCE SHEET DATA:
Net working capital $ 54,840 $ 50,890 $ 52,316 $ 43,367 $ 36,122
Total assets 79,683 75,211 81,067 71,290 56,381
Note payable to bank and current
portion of long-term debt 586 420 420 339 339
Long-term debt, less current portion 5,207 5,792 6,211 4,689 2,928
Shareholders' equity 61,405 59,828 61,628 53,757 42,685

-14-

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

The following section provides a narrative discussion about Spartan's
financial condition and results of operation. The comments that follow
should be read in conjunction with the Company's Consolidated Financial
Statements and related notes thereto presented in this Form 10-K.

RESULTS OF OPERATIONS - 1996 COMPARED TO 1995

The following table sets forth, for the periods indicated, the
components of the Company's consolidated statements of net earnings, on an
actual basis, as a percentage of revenues:

YEARS ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
---- ---- ----

Revenues 100% 100% 100%
Costs and expenses:
Cost of products sold 84.5 85.5 82.7
Research and development 2.4 2.0 1.6
Selling, general and administrative 8.1 8.6 6.8
Loss on closure of Mexican subsidiary 2.5 -- --
Interest 0.3 0.3 0.3
---- ---- ----
Total costs and expenses 97.8 96.4 91.4
---- ---- ----
Earnings before taxes on income 2.2 3.6 8.6
Taxes on income 1.0 1.3 3.1
---- ---- ----
Net earnings 1.2% 2.3% 5.5%
==== ==== ====

Revenues increased $21.7 million (14%) from $154.1 million for the
year ended December 31, 1995, to $175.8 million for the year ended December
31, 1996. The increase was due primarily to bus and motorhome sales
increases of 95.7% and 8.5%, respectively. The increase in bus sales was
due in part to the Company's continued product diversification commitment
to develop the school and transit bus markets. This commitment was further
evidenced by the Company's recent equity purchase in school bus
manufacturer, Carpenter Industries LLC. See Note 15 to the Consolidated
Financial Statements in this Form 10-K.

Total costs and expenses from operations, net of the charge for the
closure of Spartan de Mexico, decreased as a percentage of revenues, from
96.4% in 1995 to 95.3% in 1996. The closure of Spartan de Mexico

-15-

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

illustrates the Company's decision to focus on deploying its assets in
profitable business segments that offer clear growth opportunities. The
future reduced restrictions and tariffs associated with exporting chassis
to Mexico further supports the closure of Spartan de Mexico. Costs of
products sold in 1996 was 85.1% of revenues compared to 86.3% in 1995.
This decrease was primarily the result of two factors: (i) the absorption
of fixed manufacturing overhead by the production of additional units; and
(ii) the continued focus on efficiencies and cost reductions. Selling,
general and administrative expenses decreased from 8.6% in 1995 to 8.1% in
1996 primarily as a result of increased revenues.

Research and development costs increased to 2.4% of revenues in 1996
from 2% in 1995, which reflects the Company's continued emphasis and
commitment to remain an industry leader through its research and
development engineering group.

The Company's net earnings from operations were 50% above the previous
year before the net effect of the closure of Spartan de Mexico. Exclusive
of this charge, the Company would have recorded net earnings of
$5.2 million.

The 1996 effective tax rate on continuing operation increased from
36.9% in 1995 to 39.8% in 1996. See Note 6 to the Consolidated Financial
Statements in this Form 10-K.

RESULTS OF OPERATIONS - 1995 COMPARED TO 1994

Revenues for the year ended December 31, 1995 finished at $154.1
million compared to $191.5 million for the year ended December 31, 1994, a
decrease of 20%. Net earnings were $3.4 million for the year ended
December 31, 1995 ($0.27 per share), compared to $10.6 million for the year
ended December 31, 1994 ($0.80 per share), a decline of 68%. The decrease
in revenues and earnings was primarily due to (i) soft retail conditions in
the recreational vehicle market, which resulted in part from high interest
rates to retail consumers and dealers' financing floor plans; and
(ii) conservative OEM order levels in the first three quarters of 1995. In
response to high interest rates and in preparation for the 1996 model
changeover, RV dealers trimmed inventory stock levels, which resulted in
conservative mid-year OEM order levels.

Total chassis production for 1995 decreased approximately 33% due to
slower sales of entry level recreational vehicle chassis which resulted, in
part, from the high interest rates in late 1994 through the third quarter
of 1995.

-16-

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Bus/specialty chassis unit sales increased 141% in 1995 compared to
1994. This increase in net sales was the result of the Company's
production of its new school and transit bus products during the last half
of 1995.

The 1995 effective tax rate on continuing operations of 36.9%
increased from 35.7% in 1994. The increase over the federal statutory rate
of 34% was a result of the factors listed in Note 6 to the Consolidated
Financial Statements contained in this Form 10-K.

QUARTERLY RESULTS

The Company's rate of sales growth has varied historically from
quarter to quarter. For a description of quarterly financial data, see
Note 17 to the Consolidated Financial Statements in this Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 1996, cash provided by operating
activities was approximately $4.7 million which was consistent with cash
provided by operating activities for the year ended December 31, 1995.
The Company's working capital increased $3.9 million from $50.9
million in 1995 to $54.8 million in 1996. See the "Consolidated Statement
of Cash Flows" contained in this Form 10-K for further information
regarding the $.3 million decrease in cash and cash equivalents from $5.2
million in 1995 to $4.9 million in 1996. See "Selected Financial Data" for
a five-year comparison of working capital. For a discussion of a
subsequent event affecting liquidity, see Note 15 to the Consolidated
Financial Statements in this Form 10-K.

Shareholders' equity increased approximately $1.6 million to $61.4
million as of December 31, 1996. This change is the result of net earnings
of $2.3 million, dividends of $.6 million paid on July 8, 1996, $2.6
million to acquire 300,000 shares of the Company's Common Stock and a $2.2
million change in the cumulative translation adjustment. The Company's
debt to equity ratio improved to 9.4% as of December 31, 1996, compared to
10.4% at December 31, 1995.

The Company's unsecured line of credit provides for maximum borrowings
of $15 million. The interest rate is 2% above the 30-day London Inter Bank
Offered Rate ("LIBOR"). The Company had not borrowed against the line of
credit as of December 31, 1996, at which time the LIBOR rate was 5.78%. In
addition, under the terms of its credit agreement with its bank, the
Company has the ability to issue letters of credit totaling $400,000. At
December 31, 1996, the Company had outstanding letters of credit totaling
$200,000.

-17-

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

EFFECT OF INFLATION

Inflation affects the Company in two principal ways. First, the
Company's debt is tied to the prime and LIBOR rates so that increases
affecting interest rates may be translated into additional interest
expense. Second, general inflation impacts prices paid for labor, parts
and supplies. Whenever possible, the Company attempts to cover increased
costs of production and capital by adjusting the selling prices of its
products. However, the Company normally does not attempt to negotiate
inflation-based price adjustment provisions into its contracts. Since
order lead times can be as much as six months, Spartan has limited ability
to pass on cost increases to its customers on a short-term basis. In
addition, the markets served by the Company are competitive in nature, and
competition limits the pass through of cost increases in many cases. The
Company strives to minimize the effect of inflation through cost reductions
and improved productivity.

-18-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
----------------------------
ASSETS (NOTE 7) 1996 1995
------------ ------------

CURRENT ASSETS:
Cash and cash equivalents $ 4,912,001 $ 5,202,595
Investment securities (Note 2) 8,955,809 7,688,693
Accounts receivable, less allowance for
doubtful accounts of $629,000 in 1996
and $591,000 in 1995 (Note 8) 26,299,698 20,202,534
Inventories (Note 3) 24,283,517 24,394,303
Deferred tax benefit (Note 6) 1,471,700 1,453,000
Federal taxes receivable 925,000 --
Other current assets (Note 12) 1,063,601 1,539,765
----------- ------------
TOTAL CURRENT ASSETS 67,911,326 60,480,890

PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) 11,403,194 12,267,287
DEFERRED TAX BENEFIT -- 1,163,000
OTHER ASSETS (Note 12) 368,249 1,299,890
----------- ------------
TOTAL $79,682,769 $75,211,067
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 6,264,362 $ 3,801,135
Other current liabilities and
accrued expenses 2,058,820 619,279
Accrued warranty expense 2,002,870 1,621,954
Accrued customer rebates 480,216 1,030,658
Taxes on income -- 449,000
Accrued compensation and related taxes 1,034,496 1,064,368
Accrued vacation 644,754 584,651
Current portion of long-term debt (Note 7) 586,000 420,000
----------- ------------
TOTAL CURRENT LIABILITIES 13,071,518 9,591,045

LONG-TERM DEBT, LESS CURRENT PORTION (Note 7) 5,206,631 5,791,728

COMMITMENTS AND CONTINGENT LIABILITIES (Note 11)

-19-

SHAREHOLDERS' EQUITY (Note 13):
Preferred stock, $1.00 par value; 2,000,000
shares authorized (none issued)
Common stock, $.01 par value; 23,900,000
shares authorized, issued 12,354,072 shares
as of December 31, 1996; Common stock,
no par value, issued 12,623,872 shares
as of December 31, 1995 123,541 --

Additional paid in capital 21,065,942 21,482,878
Retained earnings 40,195,117 40,543,432
Valuation allowance 20,020 61,025
Cumulative translation adjustment -- (2,259,041)
----------- ------------
TOTAL SHAREHOLDERS' EQUITY 61,404,620 59,828,294
----------- ------------
TOTAL $79,682,769 $75,211,067
=========== ============

See notes to consolidated financial statements.

-20-

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF NET EARNINGS

YEARS ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994
------------ ------------ -------------

REVENUES:
Net Sales (Note 8) $174,677,163 $152,598,873 $189,408,803
Other income (Notes 2) 1,148,807 1,483,528 2,117,681
------------ ------------ ------------
TOTAL 175,825,970 154,082,401 191,526,484

COSTS AND EXPENSES:
Cost of products sold 148,629,018 131,808,951 158,389,539
Research and development 4,193,639 3,135,059 3,002,391
Selling, general and administrative 14,264,179 13,252,089 13,127,261
Interest 464,166 459,100 488,289
Loss on closure of Mexican subsidiary 4,422,907 -- --
------------ ------------ ------------
TOTAL 171,973,909 148,655,199 175,007,480

EARNINGS BEFORE TAXES ON INCOME 3,852,061 5,427,202 16,519,004

TAXES ON INCOME (Note 6) 1,532,000 2,000,000 5,906,000
------------ ------------ ------------
NET EARNINGS $ 2,320,061 $ 3,427,202 $ 10,613,004
============ ============ ============
NET EARNINGS PER SHARE $ 0.18 $ 0.27 $ 0.80
============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,541,000 12,887,000 13,203,000
============ ============ ============

See notes to consolidated financial statements.

-21-

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

ADDITIONAL CUMULATIVE
NUMBER COMMON PAID IN RETAINED VALUATION TRANSLATION
OF SHARES STOCK CAPITAL EARNINGS ALLOWANCE ADJUSTMENT TOTAL
--------- ------- ---------- -------- --------- ------------ ------

BALANCE AT JANUARY 1, 1994 13,075,872 $ 21,785,252 $31,950,522 $ 20,991 $53,756,765
Purchase and constructive
retirement of stock (45,750) (77,474) (583,712) (661,186)
Stock options exercised 30,750 424,150 424,150
Net earnings 10,613,004 10,613,004
Dividends paid ($0.05 per share) (654,898) (654,898)
Foreign currency translation
adjustment (Net of tax benefit
of $751,000) (1,479,096) (1,479,096)
Unrealized losses on investments
(Net of tax benefit of $192,000) $(370,715) (370,715)
----------- ------------- ----------- ------------ ---------- ----------- ------------
BALANCE AT DECEMBER 31, 1994 13,060,872 22,131,928 41,324,916 (370,715) (1,458,105) 61,628,024

Purchase and constructive
retirement of stock (450,000) (763,450) (3,563,037) (4,326,487)
Stock options exercised 13,000 114,400 114,400
Net earnings 3,427,202 3,427,202
Dividends paid ($0.05 per share) (645,649) (645,649)
Foreign currency translation
adjustment (Net of tax benefit
of $412,000) (800,936) (800,936)
Change in valuation allowance (Net
(of tax liability of $225,000) 431,740 431,740
----------- ------------- ----------- ------------ ---------- ----------- ------------
BALANCE AT DECEMBER 31, 1995 12,623,872 21,482,878 40,543,432 61,025 (2,259,041) 59,828,294

-22-

Common stock $0.01 par value (21,255,232) $21,255,232
Purchase and constructive
retirement of stock (300,000) (189,670) (322,430) (2,041,697) (2,553,797)
Stock options exercised 30,200 85,565 133,140 218,705
Net earnings 2,320,061 2,320,061
Dividends paid ($0.05 per share) (626,679) (626,679)
Foreign currency translation
adjustment 2,259,041 2,259,041
Change in valuation allowance (Net
(of tax liability of $22,000) (41,005) (41,005)
----------- ------------- ----------- ------------ ---------- ----------- ------------
BALANCE AT DECEMBER 31, 1996 12,354,072 $ 123,541 $21,065,942 $40,195,117 $ 20,020 $61,404,620
=========== ============= =========== ============ ========== =========== ============

See notes to consolidated financial statements.

-23-

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994
------------ ------------ -------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 2,320,061 $ 3,427,202 $ 10,613,004
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,925,353 2,031,808 1,629,223
Gain (loss) on disposal of assets and
investment securities 3,752,328 (97,212) 44,095
Decrease (increase) in:
Accounts receivable (6,001,433) 3,460,502 (6,356,851)
Inventories 118,869 (1,545,905) 1,498,074
Deferred tax benefit (25,928) (297,000) (336,000)
Federal taxes receivable (925,000) 1,323,584 (1,446,781)
Restricted assets 2,447,647
Other assets 235,093 88,354 (725,241)
Increase (decrease) in:
Accounts payable 2,431,913 (3,148,069) 868,321
Other current liabilities and accrued
expenses 1,455,890 (795,383) (52,813)
Accrued warranty expense 380,916 (234,404) 350,233
Accrued customer rebates (550,442) 77,916 (402,745)
Taxes on income (449,000) 449,000 (225,289)
Accrued vacation 60,103 105,625 85,026
Accrued compensation and related taxes (29,438) (148,833) (131,871)
Other -- -- (49,161)
------------ ----------- -----------
TOTAL ADJUSTMENTS 2,379,224 1,269,983 (2,804,133)
------------ ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,699,285 4,697,185 7,808,871

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,385,064) (1,806,830) (4,723,840)
Proceeds of sale of property, plant and
equipment 90,148 257,785 54,375
Purchases of investment securities (4,136,097) (4,603,920) (9,151,567)
Proceeds from sales of investment securities 2,762,659 8,763,205 8,044,707
Advance of note receivable (15,000) (678,275) (1,050,000)
Principal payment on note receivable 1,076,219 752,397 226,613
------------ ----------- -----------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (1,607,135) 2,684,362 (6,599,712)
-24-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 2,000,000
Payments on long-term debt (419,097) (419,629) (396,665)
Net proceeds from exercise of stock
options 218,705 114,400 424,150
Purchase of treasury stock (2,553,797) (4,326,487) (661,186)
Payment of dividends (626,679) (645,649) (654,898)
------------ ----------- -----------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (3,380,868) (5,277,365) 711,401

-25-

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

YEARS ENDED DECEMBER 31,
--------------------------------------------
1996 1995 1994
----------- ---------- ----------

EFFECT OF EXCHANGE RATE
INCREASE (DECREASE) $ (1,876) $ 62,215 $ (23,483)
----------- ---------- ----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (290,594) 2,166,397 1,897,077
----------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 5,202,595 3,036,198 1,139,121
----------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $4,912,001 $5,202,595 $3,036,198
=========== ========== ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest
was $464,100, $459,100 and $429,227 for 1996, 1995 and 1994, respectively.
Cash paid for income taxes was $3,044,000, $460,000 and $7,613,000 for
1996, 1995 and 1994, respectively.

See notes to consolidated financial statements.

-26-

SPARTAN MOTORS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL AND SUMMARY OF ACCOUNTING POLICIES

NATURE OF OPERATIONS. Spartan Motors, Inc. ("Spartan" or the "Company")
is an international engineer and manufacturer of custom motor vehicle chassis.
Its principal markets are fire truck, motorhome, school bus, transit bus and
specialty vehicles.

The following is a summary of the significant generally accepted
accounting principles followed in the preparation of the consolidated
financial statements:

REVENUE RECOGNITION. The Company's method of accounting for the
recognition of revenue is to recognize revenue on chassis production when
the chassis has been completed, tested and tendered for delivery.

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of Spartan and its two wholly owned subsidiaries:
Spartan Motors Foreign Sales Corporation, Inc. and Spartan de Mexico (see
Note 16). All material inter-company transactions have been eliminated.
The two joint ventures discussed in Note 14 are not included in the
consolidated financial statements as the Company has not made any
expenditures for investment purposes nor have the ventures commenced
operations as of December 31, 1996.

FOREIGN CURRENCY TRANSLATION. The financial position and results of
operations of Spartan de Mexico are measured using the local currency as
the functional currency. Assets and liabilities have been translated at
the exchange rate in effect at each year-end. Income statement accounts
were translated at the average rate of exchange prevailing during the year.
Prior to the disposal of this subsidiary, translation adjustments arising
from differences in exchange rates from period to period were included in
the cumulative translation adjustments account in shareholders' equity.
Gains and losses resulting from foreign currency transactions have been
included in the determination of net income for the period in which the
exchange rate changes.

CASH AND CASH EQUIVALENTS include cash on hand, cash on deposit and
money market funds.

INVESTMENT SECURITIES are classified as available-for-sale securities
and are reported at fair value, with offsetting adjustments to
shareholders' equity net of tax, in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
fair value of investment securities is determined based on quoted market
prices.

-27-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

INVENTORIES are valued at cost, determined on the last-in, first-out
(LIFO) basis, which is not in excess of market.

PROPERTY, PLANT AND EQUIPMENT are stated at cost and are depreciated
over their estimated useful lives using principally an accelerated method
for both financial statement and income tax purposes.

TAXES ON INCOME. The Company recognizes income tax expense in
accordance with SFAS No. 109, "Accounting for Income Taxes." A deferred tax
liability or asset is recognized for the estimated future tax effects
attributable to temporary differences as measured by provisions of the
enacted tax laws, and is subject to ongoing assessment of realizability.

NET EARNINGS PER SHARE is based on the weighted average number of
common shares outstanding during each year adjusted to reflect common share
equivalents.

CONCENTRATIONS OF CREDIT RISK. The Company performs periodic credit
evaluations of its customers' financial condition and generally requires
collateral. Receivables generally are due within 30 days and allowances
are maintained for potential credit losses. Such losses consistently have
been within management's expectations. Approximately 32% of the Company's
trade accounts receivable at December 31, 1996, were represented by two
customers. At December 31, 1995, approximately 40% of the Company's trade
accounts receivable were represented by four customers.

FINANCIAL INSTRUMENTS. The Company values financial instruments as
required by SFAS No. 107 "Disclosures about Fair Values of Financial
Instruments." The carrying amount of cash and cash equivalents and notes
receivable approximates fair value. The Company estimates the fair value
of its long-term, fixed-rate debt using discounted cash flow analysis based
on the Company's current borrowing rates for similar types of debt, the
effect of which is that the carrying value of the debt approximates its
fair value.

USE OF ESTIMATES. The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.

-28-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF. Effective
January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." This Statement establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held
and used and long-lived assets and certain identifiable intangibles to be
disposed of. This Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In addition, the
Statement requires that certain long-lived assets and identifiable
intangibles to be disposed of be reported at the lower of carrying amount
or fair value less cost to sell. The initial adoption of this new
accounting standard did not have a material effect on the Company's
consolidated operating results or financial position.

RECLASSIFICATIONS. Certain items in the consolidated financial
statements for the year ended December 31, 1996, have been reclassified to
conform to the presentation in 1995.

-29-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 2 - INVESTMENT SECURITIES

A summary of the Company's investment securities portfolio is
presented in the table below.

DECEMBER 31, 1996
-----------------------------------------------------
AMORTIZED GROSS UNREALIZED ESTIMATED
----------------
COST GAIN (LOSS) FAIR VALUE
---------- ------- ---------- -------------

Collateralized mortgage obligations $1,656,286 -- $ (36,331) $1,619,955
Municipal bonds 7,269,203 $66,651 -- 7,335,854
---------- ------- ---------- ----------
TOTAL $8,925,489 $66,651 (36,331) $8,955,809
========== ======= ========== ==========

DECEMBER 31, 1995
-----------------------------------------------------
AMORTIZED GROSS UNREALIZED ESTIMATED
----------------
COST GAIN (LOSS) FAIR VALUE
---------- ------- ---------- --------------

Collateralized mortgage obligations $1,565,961 -- $(27,626) $1,538,335
Municipal bonds 6,028,707 $122,087 (436) 6,150,358
---------- -------- --------- ----------
TOTAL $7,594,668 $122,087 $(28,062) $7,688,693
========== ======== ========= ==========

The maturity distribution of investments at December 31, 1996, is
shown below. The distribution of mortgage-backed securities is based on
average expected maturities. Actual maturities may differ because issuers
have the right to call or prepay obligations.

-30-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

AMORTIZED ESTIMATED FAIR
COST VALUE
----------- --------------

Under 1 year $1,100,586 $1,100,297
1 year - 5 years 3,022,907 3,052,918
5 years - 10 years 3,746,234 3,791,286
Over 10 years 1,055,762 1,011,308
---------- ----------
TOTAL $8,925,489 $8,955,809
========== ==========

The Company computes gains and losses on dispositions of investment
securities using the specific identification method. Gains of
approximately $19,000, $43,000 and $84,000, and losses of approximately
$6,000, $28,000 and $101,000 were realized from sales of investment debt
securities during 1996, 1995 and 1994, respectively.

The Company recognized investment income from investment securities of
approximately $688,900, $772,000 and $720,000 during 1996, 1995 and 1994,
respectively.

NOTE 3 - INVENTORIES

Inventories are summarized as follows:

DECEMBER 31,
---------------------------------------
1996 1995
------------ ------------

Finished goods $ 2,449,406 $ 1,779,551
Raw materials and purchased components 22,057,444 19,844,049
Work in process 528,667 3,270,703
Obsolescence reserve (752,000) (500,000)
------------ ------------
TOTAL $24,283,517 $24,394,303
============ ============

Substantially all inventories are valued at the lower of LIFO cost or
market. For 1996 and 1995, inventory valued at LIFO was approximately the
same as inventory valued using the first in, first out method. The LIFO
valuation method had a minimal effect on earnings for the years ended
December 31, 1996 and 1995.

-31-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is summarized by major classifications as
follows:

DECEMBER 31,
---------------------------------------
1996 1995
----------- ------------

Land and improvements $ 1,167,358 $ 1,157,485
Buildings and improvements 8,063,009 10,118,376
Plant machinery and equipment 2,416,422 2,298,876
Furniture and fixtures 6,660,117 3,928,058
Vehicles 1,073,300 1,046,226
----------- ------------
TOTAL 19,380,206 18,549,021
Less accumulated depreciation 7,977,012 6,281,734
----------- ------------
NET PROPERTY, PLANT AND EQUIPMENT $11,403,194 $12,267,287
=========== ============

NOTE 5 - LINE OF CREDIT

The Company has available a $15,000,000 unsecured line of credit with
a bank. Interest is at 2% above the LIBOR rate (LIBOR rate at December 31,
1996 was 5.78%). The line expires on June 1, 1997. At December 31, 1996
and 1995, there were no borrowings outstanding on the line of credit.

-32-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 6 - TAXES ON INCOME

Income tax expense (credit) is summarized as follows:

DECEMBER 31,
----------------------------------------------
1996 1995 1994
----------- ----------- -----------

Current:
Federal $1,450,000 $2,176,000 $6,242,000
State 204,000 121,000
----------- ----------- -----------
Total current 1,654,000 2,297,000 6,242,000

Deferred:
Federal (102,000) (230,000) (336,000)
State (20,000) (67,000)
----------- ----------- -----------
Total deferred (122,000) (297,000) (336,000)
----------- ----------- -----------
TOTAL PROVISION FOR INCOME TAXES $1,532,000 $2,000,000 $5,906,000
=========== =========== ===========

Income before income taxes:

1996 1995 1994
----------- ----------- -----------

Domestic $ 9,501,261 $6,082,575 $17,632,257
Foreign (5,649,200) (655,373) (1,113,253)
------------ ----------- ------------
TOTAL PRETAX INCOME $ 3,852,061 $5,427,202 $16,519,004
============ =========== ============

-33-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Differences between the expected income tax expense, derived from
applying the federal statutory income tax rate to earnings before taxes on
income, and the actual tax expenses are as follows:

1996 1995 1994
----------------- ----------------- ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------

Federal income taxes at the
statutory rate $1,310,000 34.0% $1,845,000 34.0% $5,727,000 34.6%
Increase (decrease) in income
taxes resulting from:
Loss of foreign subsidiary not
deductible for U.S. tax purposes 280,000 7.3 229,000 4.2 333,000 2.1
Foreign Sales Corporation (70,000) (1.8) (86,000) (1.6) (51,700) (0.3)
Nondeductible expenses 40,000 1.0 33,000 0.6 22,000 0.1
Stock compensation expense (7,000) (0.2) (10,000) (0.2) (41,000) (0.3)
State tax expense 121,000 3.1 54,000 1.0
Municipal income (131,000) (3.4) (134,000) (2.4) (114,000) (0.7)
Other (11,000) (0.2) 69,000 1.3 30,700 0.2
----------- ----- ----------- ----- ----------- ------
TOTAL $1,532,000 39.8% $2,000,000 36.9% $5,906,000 35.7%
=========== ===== =========== ===== =========== ======

Amount is a blended rate calculated as follows: 34% for the first
$10,000,000, 35% for amounts from $10,000,001 to $15,000,000 and 38% on
amounts in excess of $15,000,000.

-34-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Temporary differences which give rise to deferred tax assets
(liabilities) are as follows:

CURRENT ASSET DECEMBER 31,
---------------------------------
1996 1995
----------- ------------

Additional capitalized inventory costs $ 112,000 $ 113,136
Vacation accrual 88,000 175,271
Warranty reserve 681,000 567,684
Inventory allowance 256,000 175,000
Bonus accrual 115,000 107,540
Allowance for doubtful accounts 214,000 113,750
Foreign subsidiary -- 127,000
Valuation allowance for investments (10,300) (33,000)
Other 16,000 106,619
----------- ------------
TOTAL $1,471,700 $1,453,000
=========== ============
LONG-TERM ASSET
Tax benefit of cumulative translation
adjustment -- $1,163,000
=========== ============

NOTE 7 - LONG-TERM DEBT

Long-term debt consists of the following DECEMBER 31,
---------------------------
1996 1995
----------- ------------

Note payable to Michigan Strategic Fund, interest at 85% of prime,
which was 8.5% at December 31, 1995, payable in monthly
installments of approximately $13,300 plus interest through
November 2006; collateralized by building $1,586,687 $1,746,666
Note payable to Michigan Strategic Fund, interest at 85% of
prime, payable in monthly installments of approximately
$14,100 plus interest through December 1998; collateralized
by accounts receivable, inventory and equipment 329,661 499,205
Note payable to bank, with interest payable monthly at LIBOR
plus 2.25%, due December 1999, uncollateralized 2,100,000 2,100,000

-35-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Mortgage note payable to bank, interest at 7%, payable in
monthly installments of approximately $18,000 including
interest through March 1999, uncollateralized 1,776,283 1,862,236
Other long-term debt, uncollateralized -- 3,621
---------- ----------
TOTAL $5,792,631 $6,211,728

Less current portion of long-term debt 586,000 420,000
---------- ----------
TOTAL $5,206,631 $5,791,728
========== ==========

-36-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The Company's various credit agreements have several restrictive covenants,
including maintenance of a minimum level of net worth and a restriction on
the disposition of certain assets.

The aggregate maturities of long-term debt for the five years
following December 31, 1996, are approximately as follows:

1997. . . . . . . . . . . . . . . . . . . . . . . .$ 586,000
1998. . . . . . . . . . . . . . . . . . . . . . . . 583,468
1999. . . . . . . . . . . . . . . . . . . . . . . . 3,516,516
2000. . . . . . . . . . . . . . . . . . . . . . . . 160,000
2001. . . . . . . . . . . . . . . . . . . . . . . . 160,000
2002 and thereafter . . . . . . . . . . . . . . . . 786,647
----------
TOTAL $5,792,631
==========

NOTE 8 - TRANSACTIONS WITH MAJOR CUSTOMERS

The Company had two customers classified as major customers in 1996
and three in 1995 and 1994:

1996 1995 1994
-------------------------- -------------------------- ---------------------------
ACCOUNTS ACCOUNTS ACCOUNTS
CUSTOMER SALES RECEIVABLE SALES RECEIVABLE SALES RECEIVABLE
- -------- ----- ---------- ----- ---------- ----- ----------

A. . . . . . . . . . $32,800,000 $3,660,000 $19,742,000 $1,711,000 $27,476,000 $1,806,000
B. . . . . . . . . . 23,500,000 1,783,000 19,375,000 738,000 22,091,000 687,000
C. . . . . . . . . . 15,274,000 630,000 19,077,000 539,000

NOTE 9 - PROFIT-SHARING PLAN

The Spartan Motors, Inc. Profit-Sharing Plan and Trust covers all
Company employees who meet length of service and minimum age requirements.
Contributions to the plan are determined annually by the Board of Directors
and were $300,000, $240,000 and $450,000 for 1996, 1995 and 1994,
respectively. The Company's policy is to fund plan costs accrued.

-37-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 10 - STOCK OPTIONS

The Company has incentive stock option plans covering certain
employees. Shares reserved for options under these plans total 2,900,000.
The options granted subsequent to January 1, 1991, are exercisable for a
period of 10 years from the grant date except for options granted to the
Chairman of the Board which have an exercise period of five years. The
options granted prior to January 1, 1991, are exercisable for a period of
three years from the grant date. The exercise price for all options is
equal to the market price at the date of grant.

The Company also has a non-qualified stock option plan for certain
employees and directors. Shares reserved for options under this plan total
900,000 and the options are exercisable for a period of 10 years from the
grant date. The exercise price for these options is equal to the market
price at the date of grant.

Activity for the years ended December 31, 1996, 1995 and 1994 is as
follows:

INCENTIVE NON-QUALIFIED
STOCK OPTION PLANS STOCK OPTION PLAN
---------------------------- ----------------------------
OPTION OPTION OPTION OPTION
PRICE RANGE SHARES PRICE RANGE SHARES
----------- ------ ----------- --------

Balance at January 1, 1994 484,640 84,000

Options granted $13.25 - $14.58 318,350 $13.25 16,000
Options exercised $12.67 - $14.50 (28,550) $14.50 (2,000)
Options canceled $12.67 - $14.50 (4,050) $12.67 - $14.50 (7,500)
------- -------
Balance at December 31, 1994 770,390 90,500
======= =======
Options granted $ 8.80 - $10.50 430,500
Options exercised $ 8.80 (13,000)
Options canceled $12.67 - $14.50 (39,050) $ 8.80 (10,050)
------- -------
Balance at December 31, 1995 $12.67 - $16.50 731,340 $ 1.73 - $14.50 497,950
======= =======

-38-

Options granted $ 6.75 361,400 $ 6.75 - $ 7.50 87,000
Options exercised $ 6.75 - $ 7.50 (30,200)
Options canceled (111,150) (54,000)

Balance at December 31, 1996 981,590 500,750
======= =======

Exercisable at December 31, $ 6.75 - $16.50 981,590 $ 6.75 - $14.50 500,750
1996
======= =======

The estimated fair value of options granted in 1995 and 1996 range
from $7.20 per share to $10.81 per share. The Company applies APB No. 25
and released interpretations in accounting for its stock options and
purchase plans. Accordingly, no compensation cost has been recognized for
its stock option plans. Had compensation for these plans been determined
based on the fair market value at the grant dates for awards under those
plans consistent with the method of FASB Statement 123, the Company's net
income and earnings per share for the year ended December 31, 1996, would
have been reduced to the PRO FORMA accounts indicated below.

Net Earnings 1996 1995
---------- ----------

As reported . . . . . . . . . . . . . . $2,320,061 $3,427,202
PRO FORMA . . . . . . . . . . . . . . . $2,141,235 $3,356,995

Net Earnings Per Share
As reported . . . . . . . . . . . . . . $ 0.18 $ 0.27
PRO FORMA . . . . . . . . . . . . . . . $ 0.17 $ 0.26

-39-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The fair market value of options granted under the Company's stock
option plans during 1995 and 1996 was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used: no dividend yield, expected volatility of 33%, risk free
interest rate of 6.5% and expected lives of three to four years.

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES

Under the terms of its credit agreement with its bank, the Company has
the ability to issue letters of credit totaling $400,000. At December 31,
1996, the Company had outstanding letters of credit totaling $200,000.

At December 31, 1996, the Company and its subsidiaries were parties,
both as plaintiff and defendant, to a number of lawsuits and claims
arising out of the normal course of their business. In the opinion of
management, the financial position of the Company will not be materially
affected by the final outcome of these legal proceedings.

The Company has repurchase agreements with lending institutions which
have provided floor plan financing to OEMs. These agreements provide for
the repurchase of products from the lending institution in the event of the
OEMs default. The total contingent liability on December 31, 1996, was
approximately $5.132 million. Historically, losses under these agreements
have not been significant and it is management's opinion that any future
losses will not have a material effect on the Company's financial strength
or operating results.

NOTE 12 - NOTES RECEIVABLE

On April 4, 1994, the Company entered into a financing agreement with
an unrelated entity whereby a line of credit in the amount of $792,300 was
established. Additionally, the Company entered into a term agreement with
such entity for $524,000. The line of credit is to be repaid with funds
generated from this entity's operations. The loan is to be repaid in
monthly installments of principal of at least $13,500, plus interest, with
a final installment of the unpaid balance due on or before January 1, 1998.
The loan bears interest at a variable rate equivalent to the base lending
rate of First of America Bank-Central plus one-half of that rate per annum,
with a minimum interest rate of 9% per annum. The line of credit and loan
are secured by all accounts receivable, inventory and fixed assets of such
entity as well as an unconditional personal guaranty of the President of
the entity and certain shareholders. At December 31, 1996, $683,000 was
outstanding on the line of credit and approximately $485,000 was
outstanding on the loan.

-40-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Interest income from notes receivable of approximately $134,000,
$261,000 and $193,000 is included in other income at December 31, 1996,
1995 and 1994, respectively.

NOTE 13 - PURCHASE OF TREASURY STOCK

On November 14, 1994, the Board of Directors authorized management to
repurchase up to 100,000 additional shares of its Common Stock in the open
market. Repurchase of the Common Stock was contingent upon market
conditions. No expiration date was set for the completion of the
repurchase program. During the fourth quarter of 1994, the Company
repurchased 45,750 shares at an average price of approximately $14.45 per
share.

On March 8, 1995, the Board of Directors authorized management to
repurchase up to an additional 150,000 shares of its Common Stock in the
open market. This action increased the total authorization for repurchase
to 250,000 shares of Common Stock. During April 1995, the Company
repurchased 147,900 shares at an average market price of approximately
$10.45 per share. The Company completed the authorized buyback in June of
1995 by acquiring 102,100 shares at an average market price of $9.00 per
share.

On July 11, 1995, the Board of Directors authorized management to
repurchase up to 1,000,000 additional shares of its Common Stock in the
open market. Repurchase of the Common Stock was contingent upon market
conditions. No expiration date was set for the completion of the
repurchase program. During September and December 1995, the Company
repurchased 200,000 shares at an average market price of approximately
$9.13 to $9.50 per share. During 1996 the Company repurchased 300,000
shares at an average market price of approximately $8.51 per share. All
treasury stock has been constructively retired in accordance with the
Michigan Business Corporation Act applicable to all Michigan corporations.

NOTE 14 - JOINT VENTURES

In June 1994, the Company entered into a Joint Venture Agreement with
Societe D' Equipment de Transport et de Carosserie S.A. ("Setcar") for the
purpose of manufacturing and selling bus chassis in Tunisia. A joint-stock
corporation called International Motor Corporation, owned 65% by Setcar and
35% by Spartan, was formed to carry out the design, assembly, manufacture
and sale of bus chassis. Additionally, Spartan International, a Tunisian
export company, owned 65% by Spartan and 35% by Setcar, was formed to carry
out the sale of bus chassis manufactured by International Motor Corporation
and buses manufactured by Setcar to other geographic areas.

-41-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 15 - SUBSEQUENT EVENT

In January 1997, the Company completed its acquisition of a one-third
(33%) interest in Carpenter Industries, Inc. ("Carpenter") for
approximately $10 million. Carpenter is a manufacturer of school bus
bodies. The acquisition, which will be accounted for under the purchase
method, was financed with existing cash and borrowings under the Company's
revolving line of credit. The results of operations of Carpenter will be,
beginning in the first quarter of 1997, included in the consolidated
financial statements of the Company using the equity method of accounting.

NOTE 16 - LOSS ON CLOSURE OF MEXICO SUBSIDIARY

In December 1996, the Company closed the operations at its wholly
owned subsidiary, Spartan de Mexico in Queretaro, Mexico. Spartan de
Mexico produced bus chassis for the Mexican bus market and had incurred
losses from operations of $1.2 million, $.7 million and $1.1 million
respectively in 1996, 1995 and 1994 on revenues of $.1 million, $.2 million
and $2.9 million for 1996, 1995 and 1994, respectively. As a result of its
decision to cease operations the Company recorded an additional loss of
$4.4 million resulting from the termination of the cumulative translation
adjustment and the disposal of substantially all inventory not transferred
to the Company's Charlotte, Michigan production facilities and the write
off of certain account receivables. Additionally, as part of its exit plan
the Company is actively seeking buyers for the real estate and building
located in Queretaro, Mexico, and anticipates completing its exit plan by
the end of the third quarter of 1997.

-42-

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for the year ended December 31,
1996, is as follows:

QUARTER ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996
----------- ----------- ----------- -------------

Revenues $47,388,202 $44,702,555 $41,321,410 $42,414,000
Expenses 45,520,174 42,683,286 39,481,914 39,866,000
Losses on closure of Mexican
subsidiary -- -- -- (4,423,000)
----------- ----------- ----------- -----------
Earnings (Loss) before taxes on
income 1,868,028 2,019,269 1,839,496 (1,875,000)
Taxes on income 656,000 876,000 637,000 (637,000)
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ 1,212,028 $ 1,143,269 $ 1,202,496 $(1,238,000)
=========== =========== =========== ===========
NET EARNINGS (LOSS) PER
SHARE $ 0.10 $ 0.09 $ 0.10 $ (0.09)
=========== =========== =========== ===========

Summarized quarterly financial data for the year ended December 31, 1995, is as
follows:

QUARTER ENDED
---------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995
----------- ----------- ----------- -------------

Revenues $44,201,274 $28,792,237 $36,028,443 $45,060,447
Expenses 41,265,162 29,327,183 34,967,273 43,095,581
----------- ----------- ----------- -----------
Earnings (Loss) before taxes on
income 2,936,112 (534,946) 1,061,170 1,964,866
Taxes on income 1,163,000 (312,000) 421,000 728,000
----------- ----------- ----------- -----------

-43-

NET EARNINGS (LOSS) $ 1,773,112 $ (222,946) $ 640,170 $ 1,236,866
=========== ============ =========== ===========

NET EARNINGS (LOSS) PER
SHARE $ 0.14 $ (0.02) $ 0.05 $ 0.10
=========== ============ =========== ===========

Selling, General and Administrative expenses were reduced by approximately
$700,000, resulting from amended income tax returns.

-44-

DELOITTE &
TOUCHE LLP
______________ ______________________________________________________
Suite 800 Telephone: (517) 487-2251
One Michigan Avenue
120 North Washington Square
Lansing, Michigan 48933-1681

INDEPENDENT AUDITORS' REPORT

Board of Directors
Spartan Motors, Inc.
Charlotte, Michigan

We have audited the accompanying consolidated balance sheets of Spartan
Motors, Inc. (the "Company") and its subsidiaries as of December 31, 1996
and 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Spartan Motors, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.

-45-

As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for investment securities effective January 1, 1994 to
conform with Statement of Financial Accounting Standards No. 115.

/s/ Deloitte & Touche LLP

Lansing, Michigan
March 7, 1997

________________
Deloitte Touche
Tohmatsu
International
________________

-46-

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information regarding directors of the Company contained under the
captions "Board of Directors," "Executive Officers" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the definitive Proxy
Statement for its annual meeting of shareholders to be held on June 5,
1997, is here incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information contained under the captions "Compensation of
Directors" and "Executive Compensation" in the definitive Proxy Statement
for its annual meeting of shareholders to be held on June 5, 1997, is here
incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

The information contained under the captions "Voting Securities,"
"Security Ownership of Certain Beneficial Owners" and "Security Ownership
of Management" in the definitive Proxy Statement for its annual meeting of
shareholders to be held on June 5, 1997, is here incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

No information is required to be discussed under this item of this
Form 10-K.

PART IV

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

ITEM 14(A)(1). LIST OF FINANCIAL STATEMENTS.

The following consolidated financial statements of the Company and its
subsidiaries are filed as a part of this Report:

- Consolidated Balance Sheets as of December 31, 1996 and December
31, 1995

-47-

- Consolidated Statements of Net Earnings for the Fiscal Years
Ended December 31, 1996, December 31, 1995 and December 31, 1994

- Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended December 31, 1996, December 31, 1995 and December 31,
1994

- Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 1996, December 31, 1995 and December 31, 1994

- Notes to Consolidated Financial Statements as of December 31,
1996

- Report of Independent Auditors

ITEM 14(A)(2). FINANCIAL STATEMENT SCHEDULES. Attached as Appendix A.

The following consolidated financial statement schedule of the Company
and its subsidiaries is filed as part of this report:

- Schedule II--Valuation and Qualifying Accounts

All other schedules (I, III, IV and V) for which provision is
made in the applicable accounting regulations of the Securities and
Exchange Commission are not required under the related instructions or are
inapplicable and, therefore, have been omitted.

ITEM 14(A)(3). LIST OF EXHIBITS. The following exhibits are filed as a
part of this report:

EXHIBIT
NUMBER

2.1 Investment Agreement dated December 23, 1996, among
Recovery Equity Investors II, L.P., Spartan Motors, Inc.,
Carpenter Industries, Inc., Carpenter Industries LLC, The
Beurt SerVaas Revocable Trust and The Curtis Publishing
Company. Previously filed as an Exhibit to the Company's
Form 8-K Current Report filed on January 21, 1997, and
incorporated herein by reference.

2.2 Amendment No. 1 to the Investment Agreement dated January
6, 1997. Previously filed as an Exhibit to the Company's
Form 8-K Current Report filed on January 21, 1997, and
incorporated herein by reference.

3.1 Spartan Motors, Inc. Restated Articles of Incorporation.
Previously filed as an Exhibit to the Company's Quarterly
Report on Form 10-Q for the period ended June 30, 1996, and
incorporated herein by reference.
-48-

3.2 Spartan Motors, Inc. Bylaws (restated to reflect all
amendments). Previously filed as an Exhibit to the
Company's Annual Report on Form 10-K for the period ended
December 31, 1995, and incorporated herein by reference.

4.1 Spartan Motors, Inc. Restated Articles of Incorporation.
See Exhibit 3.1 above.

4.2 Spartan Motors, Inc. Bylaws. See Exhibit 3.2 above.

4.3 Form of Stock Certificate. Previously filed as an Exhibit
to the Registration Statement on Form S-18 (Registration
No. 2-90021-C) filed on March 19, 1984, and incorporated
herein by reference.

10.1 Restated Spartan Motors, Inc. 1988 Non-Qualified Stock
Option Plan.* Previously filed as an Exhibit to the
Company's Quarterly Report on Form 10-Q for the period
ended June 30, 1996, and incorporated herein by reference.

10.2 The Spartan Motors, Inc. 1984 Incentive Stock Option Plan.*
Previously filed as an Exhibit to the Registration
Statement on Form S-8 (Registration No. 33-28432) filed on
April 28, 1989, and incorporated herein by reference.

10.3 Restated Spartan Motors, Inc. 1994 Incentive Stock Option
Plan.* Previously filed as an Exhibit to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1996, and incorporated herein by reference.

10.4 The Spartan Motors, Inc. 1996 Stock Option and Restricted
Stock Plan for Outside Market Advisors. Previously filed as
an Exhibit to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1996, and incorporated herein
by reference.

10.5 Carpenter Industries, Inc. Stockholders' Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.

10.6 Contribution Agreement between Carpenter Industries LLC and
Carpenter Industries, Inc. Previously filed as an Exhibit
to the Company's Form 8-K Current Report filed on January
21, 1997, and incorporated herein by reference.

10.7 Carpenter Industries, Inc. Registration Rights Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.
-49-

21 Subsidiaries of Registrant.

23 Consent of Independent Accountants.

27 Financial Data Schedule.

_________________________
*Management contract or compensatory plan or arrangement.

The Company will furnish a copy of any exhibit listed above to
any shareholder of the Company without charge upon written request to
Richard J. Schalter, 1000 Reynolds Road, Post Office Box 440, Charlotte,
Michigan 48813.

ITEM 14(B). REPORTS ON FORM 8-K.

During the last quarter of the period covered by this Report, the
registrant filed no current reports on Form 8-K.

-50-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

SPARTAN MOTORS, INC.

March 28, 1997 By /S/ RICHARD J. SCHALTER
Richard J. Schalter,
Secretary and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

March 14, 1997 By /S/ GEORGE W. SZTYKIEL
George W. Sztykiel, Director
(Principal Executive Officer)

March 14, 1997 By /S/ JOHN E. SZTYKIEL
John E. Sztykiel, Director
(Principal Operating Officer)

March 28, 1997 By /S/ RICHARD J. SCHALTER
Richard J. Schalter
(Principal Accounting and
Financial Officer)

March 14, 1997 By /S/ WILLIAM F. FOSTER
William F. Foster, Director

March 14, 1997 By /S/ ANTHONY G. SOMMER
Anthony G. Sommer, Director

March 14, 1997 By /S/ GEORGE TESSERIS
George Tesseris, Director

March 14, 1997 By /S/ CHARLES E. NIHART
Charles E. Nihart, Director

-51-

March 14, 1997 By /S/ ROGER B. BURROWS
Roger B. Burrows, Director

March 14, 1997 By /S/ DAVID R. WILSON
David R. Wilson, Director

_____________________, 1997 By _______________________
James C. Penman, Director

-52-

EXHIBIT INDEX

EXHIBIT
NUMBER DOCUMENT

2.2 Amendment No. 1 to the Investment Agreement dated January
6, 1997.Previously filed as an Exhibit to the Company's
Form 8-K Current Report filed on January 21, 1997, and
incorporated herein by reference.

4.1 Spartan Motors, Inc. Restated Articles of Incorporation.
See Exhibit 3.1 above.

4.2 Spartan Motors, Inc. Bylaws. See Exhibit 3.2 above.

4.3 Form of Stock Certificate. Previously filed as an Exhibit
to the Registration Statement on Form S-18 (Registration
No. 2-90021-C) filed on March 19, 1984, and incorporated
herein by reference.

-53-

10.5 Carpenter Industries, Inc. Stockholders' Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.

10.7 Carpenter Industries, Inc. Registration Rights Agreement.
Previously filed as an Exhibit to the Company's Form 8-K
Current Report filed on January 21, 1997, and incorporated
herein by reference.

21 Subsidiaries of Registrant.

23 Consent of Independent Accountants.

27 Financial Data Schedule.
______________________________________

*Management contract or compensatory plan or arrangement.

-54-

APPENDIX A
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
SPARTAN MOTORS, INC. AND SUBSIDIARIES

YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
---------

BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
----------- ---------- ---------- ---------- ----------

YEAR ENDED DECEMBER 31, 1996:

Allowance for doubtful accounts $ 591,000 $ 71,400 $ 33,400 $ 629,000
Inventory obsolescence reserve 500,000 252,000 752,000
Warranty Reserves 1,506,125 5,481,234 4,984,489 2,002,870

YEAR ENDED DECEMBER 31, 1995:

Allowance for doubtful accounts $ 540,000 $ 51,000 $ 591,000
Inventory obsolescence reserve 500,000 500,000
Warranty Reserves 1,856,358 4,799,624 $5,034,028 1,621,954

YEAR ENDED DECEMBER 31, 1994:

Allowance for doubtful accounts $ 153,000 $ 906,000 $ 519,000 $ 540,000
Warranty Reserves 1,506,125 5,071,152 4,720,919 1,856,358

A-1

                                                       EXHIBIT 21



                   SUBSIDIARIES OF SPARTAN MOTORS, INC.


                                                       JURISDICTION OF
        NAME OF SUBSIDIARY                             INCORPORATION
                                                   
Spartan de Mexico S.A. de C.V.                         Mexico

Spartan Motors Foreign Sales Corporation, Inc.         West Indies


                                                       EXHIBIT 23




INDEPENDENT AUDITORS' CONSENT



Board of Directors
Spartan Motors, Inc.
Charlotte, Michigan


We consent to the incorporation by reference in Registration
Statement No. 33-28432 of Spartan Motors, Inc. on Form S-8 and
Registration Statement No, 33-80980 of Spartan Motors, Inc. on Form
S-8 of our report dated March 7, 1997, appearing in this Annual
Report on Form 10-K of Spartan Motors, Inc. for the year ended
December 31, 1996.

/s/ Deloitte & Touche LLP

Lansing, Michigan
March 28, 1997

 

                                                                 5
  THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
          FROM THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SPARTAN
          MOTORS, INC. AND SUBSIDIARIES FOR THE PERIOD ENDED DECEMBER 31,
          1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
          FINANCIAL STATEMENTS.

                                                          1,000
       
                                                            
                                                        12-MOS
                                               DEC-31-1996
                                                  JAN-01-1996
                                                    DEC-31-1996
                                                            4,912,001
                                                      8,955,698
                                                    26,299,698
                                                        629,000
                                                      24,283,517
                                                 67,911,326
                                                           11,403,194
                                                    7,977,012
                                                   79,682,769
                                            13,071,518
                                                           5,792,631
                                                         21,065,942
                                                     0
                                                               0
                                                       40,338,678
                                     79,682,769
                                                         174,677,163
                                                175,825,970
                                                           148,629,018
                                                   148,629,018
                                                 23,344,891
                                                     71,451
                                                  464,166
                                                   3,852,061
                                                      1,532,000
                                               2,320,061
                                                            0
                                                           0
                                                                 0
                                                      2,320,061
                                                           .18
                                                           .18