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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, 1997

[ ] 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 or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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 26, 1998: $108,338,547

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 26, 1998: 12,560,991
shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for its May 19, 1998, 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") was organized as a
Michigan corporation 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 fire 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 system, 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 the national and international
marketplace. The Company sells its chassis to four principal markets: fire
truck, motorhome, school and transit bus and step van and specialty.
Spartan focuses on certain custom niches within its four principal markets
and believes that opportunities for growth remain strong for custom-built
chassis and vehicles in each market.

The Company recognizes that annual unit sales of motorhome chassis have
been substantially greater than that of the other three principal chassis
markets. Thus, in the past three years management has placed special
emphasis on further diversification into the school bus, transit bus, step
van and specialty chassis markets.

In its continued efforts to diversify, the Company completed acquisitions
of two fire truck apparatus companies in the third quarter of 1997 and one
emergency vehicle manufacturer in the first quarter of 1998. The OEMs,
Brandon, South Dakota-based Luverne Fire Apparatus Co., Ltd. and Talladega,
Alabama-based Quality Manufacturing, Inc. have been Spartan customers for
years. The premium ambulance manufacturer, St. Paul, Minnesota-based Road
Rescue, Inc., is a new market for the Company. The Company believes that
the acquisition of an ambulance manufacturer expands product
diversification and growth opportunities. The acquisitions are expected to
place the acquired companies and Spartan in a position to take advantage of
coordinated purchasing opportunities and improved supplier relations. The
acquired companies are separate subsidiaries of Spartan and are operated
under the management that existed within each company immediately before
the acquisitions.

Also, during the first quarter of 1997, the Company purchased a 33-1/3% equity
interest in school bus body maker Carpenter Industries, Inc. ("Carpenter").
This investment should enable Spartan to expand its presence and to
continue to enter in the school bus market and the step van chassis market.
This investment in privately-held Carpenter is in equal partnership with
San Mateo, California-based Recovery Equity Investors, Inc. and former sole
owners Dr. Beurt SerVaas and SerVaas, Inc.

Spartan manufactures its chassis with commercially available components
purchased from outside suppliers. This purchasing strategy allows the
Company to service finished products with ease, control 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
associate 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 is organized into two principal groups, the Chassis Group and
the Emergency Vehicle Group.

CHASSIS GROUP

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, step van and specialty applications such as tool trucks,
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
which will serve customer needs more efficiently and economically than a
standard, commercially-produced chassis.

FIRE TRUCKS CHASSIS

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 designs new products anticipating the future
needs of the marketplace. An example of this progressive approach is the
Company's Advantage fire truck chassis and cab. The Company engineered this
entry-level product to directly compete with the $80.0 million commercial
fire truck chassis market. The Advantage fire truck chassis and cab is
priced competitively without sacrificing the added flexibility, quality and
end-user orientation of a custom-built fire truck.

Spartan monitors the availability of new technology and works closely with
its 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 in heavy-duty
commercial applications. These engines permit fire trucks 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 Engine Co. 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. An additional example of bringing technically advanced
components and products to the marketplace was the recent introduction of
the Spartan/Granning Independent Front Suspension ("I.F.S."). I.F.S.
places 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,
I.F.S. reduces oversteer and understeer, brake dive and wheel-to-wheel
transfer of road shock to passengers and the body of the vehicle.

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"). 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, establishment of maximum stepping heights on the apparatus and the
provision of access hand rails. Although NFPA standards are not mandatory,
past standards significantly have impacted fire truck purchasing decisions.

MOTORHOME CHASSIS

The Company custom manufactures chassis to the individual specifications of
its motorhome chassis OEMs, such specifications vary based on the specific

interior and exterior design specifications of the motorhomes 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, gross vehicle weight, 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 OEMs manufacturing process.

Spartan seeks to develop innovative engineering solutions to customer
requirements and strives to anticipate future market needs and trends.

TRANSIT AND SCHOOL BUS/CHASSIS

The Company made significant strides toward continued product
diversification in 1997. These diversification efforts were specifically
placed on expanding Spartan's share in the transit bus and school bus
chassis marketplace. The 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 business continues to show
encouraging growth for custom chassis manufacturing as the market
recognizes the long-term cost savings relating 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 committed to move toward small and midsize buses
under 32 feet in length, like 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 on Spartan's custom chassis, which has
increased from one OEM in 1995 to seven OEMs in 1997.

The overall school bus market has grown 4% from approximately 35,750 units
in 1990 to nearly 37,100 units in 1997. Sales of transit style buses have
increased 48% from approximately 6,300 units to 9,300 units during the same
time period. Spartan supplies transit style school bus chassis to
Carpenter, and the Company believes that this portion of the school bus
market will continue to be a growing segment of the overall school bus
market. The transit style bus generally is superior to the classic type A
& B school bus in terms of safety, handling and durability. Also, since
the transit style school bus is a relatively new product for Carpenter, the
Company currently believes that the opportunity for growth is expected to
be greater than the overall growth rate for the school bus market.

Spartan's innovative custom low floor bus chassis continued to increase
market share in 1997 as the design eliminates the need for costly
mechanical wheel chair lifts through a revolutionary curb height design
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 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. These two areas
are specifically addressed through the use of Spartan's 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 delivered its first group of custom step van chassis in the
fourth quarter of 1997. These chassis are being placed in service by a
domestic tool company. This new chassis product is expected to show
significant growth within the next two years as potential customers become
more conscious of the value of a lower cost per mile vehicle due to the
extended life cycle and reduced maintenance costs related to custom
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 continues to have strong sales growth potential in the world
marketplace. With its experience in manufacturing 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.

EMERGENCY VEHICLE GROUP

LUVERNE FIRE APPARATUS CO., LTD ("LUVERNE")

Luverne manufactures and markets primarily custom and commercial fire
pumpers, aerials and rescue apparatus. Luverne is recognized in the
industry for its innovative design and engineering expertise.

QUALITY MANUFACTURING, INC. ("QUALITY")

Quality manufactures and markets primarily custom and commercial fire
pumpers, aerials and rescue apparatus. Quality focuses its efforts on
high-end fire truck customers.

ROAD RESCUE, INC.

Road Rescue, Inc. manufactures premium, advanced-care ambulances, rescue
vehicles and related services and parts. The company is a market leader
in the design and manufacturing of Type I and Type III advanced care
ambulances, especially medium-duty type vehicles, which represent one of
the fastest growing segments of the emergency vehicle market.

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

Spartan de Mexico S.A. de C.V. ("Spartan de Mexico") was established in
January 1993 as a wholly owned subsidiary in Queretaro, Mexico. Spartan de
Mexico produced 81 transit bus chassis during 1994. The Company halted
production in 1995 due to the faltering Mexican economy that negatively
affected the demand for transit bus chassis. Spartan de Mexico incurred
losses of $0.7 million and $1.2 million during 1995 and 1996, respectively.
To minimize future negative impacts on the Company, in December 1996
management determined to close the Spartan de Mexico facility. As a result
of its decision to cease operations, the Company recorded an additional
loss of $4.4 million at year end 1996 resulting from the termination of the
cumulative translation adjustment and the disposal of substantially all
inventory not transferred to the Company's Charlotte, Michigan 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.

MARKETING

Spartan markets its custom manufactured chassis primarily through the
direct contact of its sales department with OEMs, dealers and end-users.
The newly-acquired apparatus subsidiaries maintain dealer organizations and
establish close working relationships through their sales departments.
These personal contacts focus on the quality of the Company's custom
products and allow the Company to keep customers updated on new and
improved product lines.

In 1997, Company representatives attended trade shows, rallies and
expositions throughout North America to promote its custom products. Trade
shows provide Spartan the opportunity to display its products and to meet
directly with OEMs who purchase chassis, dealers who sell finished vehicles
and consumers who buy the finished product. Participation in these events
also allows the Company to learn what customers and end-users are looking
for in the future, thus, creating competitive advantages by relaying this
information back to the Spartan research and development engineering group
for future development purposes. In 1997 the Company also attended trade
shows in Europe for the purpose of introducing, promoting and expanding the
Spartan chassis product lines into international markets.

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 salespeople based
in Charlotte, Michigan and 10 salespeople located throughout North America,
including the independent sales forces of the newly-acquired subsidiaries.
In addition, the Company retains a sales representative in London in a
continued effort to increase penetration in this international marketplace.

COMPETITION

The principal methods of competitive advantages utilized by the Company
include customized design, product and service quality and speed of
delivery. The Company competes with companies that manufacture 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 their
chassis to outside customers (OEMs). The Company's direct competitors in
the specialty chassis and emergency vehicle apparatus markets are
principally smaller manufacturers. In 1997, 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 market compared to its
competition. The market share in the custom chassis market is fragmented
and the Company believes that no one company has a dominant market
position.

MANUFACTURING

The Company has three principal assembly facilities in Charlotte, Michigan
for chassis products. Due to the custom nature of its business, Spartan
chassis cannot be manufactured efficiently on automated assembly lines.
Generally, Spartan designs, engineers and assembles its 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.

The emergency vehicle apparatus products are manufactured and assembled
in each of the subsidiary facilities. The chassis for the products are
purchased from Spartan and from outside providers of specialty and
commercial chassis manufacturers. The plants do not use automated assembly
lines since each vehicle is produced to order. The chassis rolls down the
assembly line on its own wheels as the other components are added and
connected. The body is manufactured at the facility with items such as
pumps, tanks, aerial ladders and electrical control units purchased from
outside suppliers.

The Company believes that its assembly facilities are sufficient for its
current production of chassis and capacity increases can be achieved at
relatively low cost, largely by increasing the number of production
employees or adding additional shifts.

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 Meritor Automotive, Inc., Detroit Diesel, Inc., Cummins
Engine Co., Allison Division of General Motors Corporation, Truck Cab
Manufacturing, Eaton Axle Corporation, REYCO Industries, Inc., Granning
Suspensions and Goodyear Tire and Rubber Co. The Company is able to better
control production costs due to its high volume purchasing power with these
component suppliers.

The chassis assembly facilities are 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.

RESEARCH AND DEVELOPMENT

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

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.
The end-users also may receive limited warranties from suppliers of
components that are incorporated into the Company's chassis and vehicles

PATENTS, TRADEMARKS, LICENSES AND FRANCHISES

In 1997, 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 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 its 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.

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.

ASSOCIATES

The Company employed approximately 620 full-time associates as of December
31, 1997. The Company's associates do not belong to a collective
bargaining unit and management presently considers its relations with
employees to be positive.

CUSTOMER BASE

In 1997, the Company's customer base included two major customers. Sales
to Fleetwood Motor Homes of Indiana, Inc. ("Fleetwood") were approximately
$46.8 million and sales to Newmar Corp. ("Newmar") were approximately $30.9
million. These numbers compare to sales of approximately $32.8 million to
Fleetwood and $23.5 million to Newmar in 1996 and approximately $19.7
million to Fleetwood, $19.4 million to Newmar and $15.3 million to a third
major customer in 1995. Sales to customers classified as major amounted to
43%, 32% and 35.3% of total revenues in 1997, 1996 and 1995, 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, 1997, the Company had backlog orders for the Chassis Group
of approximately $71.0 million compared with a backlog of approximately
$68.0 million at December 31, 1996. At December 31, 1997, the Company had
backlog orders for the Emergency Vehicle Group of approximately $21.7
million.

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 indicative of eventual actual shipments.

ITEM 2. PROPERTIES.

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

OWNED/ SQUARE
USED BY LOCATION USE LEASED FOOTAGE
- ---------------------- -------------------------------- ------------------- ------ -------

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

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

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

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

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

Luverne Fire 1209 E. Birch Street Headquarters, Leased 28,000
Apparatus Co., Ltd. Brandon, South Dakota Manufacturing,
and Warehousing

Quality Manufacturing, 1420 Nimitz Avenue General offices, Owned 65,000
Inc. Talladega, Alabama Manufacturing
and Warehousing

Road Rescue, Inc. 1133 Rankin Street General offices, Leased 105,000
Saint Paul, Minnesota Manufacturing
and Warehousing
- --------------------------

Currently idle

ITEM 3. LEGAL PROCEEDINGS.

At December 31, 1997, 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 1997, no matters were submitted to a vote of
security holders, through the solicitation of proxies or otherwise.

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 1,400,000 shares of its Common Stock in open market
transactions. Management repurchased 1,208,000 shares through December 31,
1997. 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, 1997:
First Quarter . . . . . . . . . . . . . . . . . $8.250 $6.375
Second Quarter. . . . . . . . . . . . . . . . . 8.000 6.625
Third Quarter . . . . . . . . . . . . . . . . . 9.625 6.875
Fourth Quarter. . . . . . . . . . . . . . . . . 7.500 5.250

Year Ended December 31, 1996:
First Quarter . . . . . . . . . . . . . . . . . $11.000 $7.250
Second Quarter. . . . . . . . . . . . . . . . . 8.870 7.125
Third Quarter . . . . . . . . . . . . . . . . . 8.000 6.375
Fourth Quarter. . . . . . . . . . . . . . . . . 7.750 6.250

The Company declared a cash dividend of $0.07 per outstanding share on
April 20, 1997 and a cash dividend of $0.05 per outstanding share on
February 27, 1996, to shareholders of record on April 20, 1997 and March
27, 1996.

The number of shareholders of record of the Company's Common Stock on March
27, 1998 was 1,016.

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, 1997, 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 (loss) 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.

YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In thousands, except per share data)

INCOME STATEMENT DATA:

Sales. . . . . . . . . . . . . . . . . . . $178,641 $174,677 $152,599 $189,409 $165,587
Cost of products sold. . . . . . . . . . . 155,291 148,629 131,809 158,390 139,011
-------- -------- -------- -------- --------
Gross profit . . . . . . . . . . . . . . . 23,350 26,048 20,790 31,019 26,576
Operating expenses:
Engineering . . . . . . . . . . . . . . 4,692 4,194 3,135 3,002 1,986
Selling, general &
administrative. . . . . . . . . . . . . 15,801 14,264 13,252 13,127 9,486
-------- -------- -------- -------- --------

Operating income . . . . . . . . . . . . . 2,857 7,590 4,403 14,890 15,104
Other. . . . . . . . . . . . . . . . . . . 52 685 1,024 1,629 664
-------- -------- -------- -------- --------
Earnings before loss on equity
investment, minority interest
and taxes on income . . . . . . . . . . 2,909 8,275 5,427 16,519 15,768
Equity in loss of affiliate. . . . . . . . 15,403 -- -- -- --
Minority interest in loss of
consolidated subsidiary . . . . . . . . -- -- -- -- 96
Loss on closure of Mexican
subsidiary. . . . . . . . . . . . . . . -- 4,423 -- -- --
Taxes on income. . . . . . . . . . . . . . 630 1,532 2,000 5,906 5,367
-------- -------- -------- -------- --------
Net earnings (loss). . . . . . . . . . . . $(13,124) $ 2,320 $ 3,427 $ 10,613 $ 10,497
======== ======== ======== ======== ========

Basic and diluted earnings
per share . . . . . . . . . . . . . . . $ (1.06) $ 0.18 $ 0.27 $ 0.80 $ 0.80
======== ======== ======== ======== ========
Cash dividends per common
share . . . . . . . . . . . . . . . . . $ 0.07 $ 0.05 $ 0.05 $ 0.05 $ 0.05
======== ======== ======== ======== ========
Basic and diluted weighted
average common shares
outstanding . . . . . . . . . . . . . . 12,381 12,541 12,887 13,203 13,185
======== ======== ======== ======== ========

BALANCE SHEET DATA:

Net working capital. . . . . . . . . . . . $ 41,429 $ 54,840 $ 50,890 $ 52,316 $ 43,367
Total assets . . . . . . . . . . . . . . . 81,245 79,683 75,211 81,067 71,290
Shareholders' equity . . . . . . . . . . . 47,489 61,405 59,828 61,628 53,757

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 operations. 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

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

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

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

YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
------ ------ ------

Sales . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0%
Cost of products sold . . . . . . . . . . . . 86.9% 85.1% 86.4%
----- ----- -----
Gross profit. . . . . . . . . . . . . . . . . 13.1% 14.9% 13.6%
Operating expenses:
Engineering. . . . . . . . . . . . . . . . 2.6% 2.4% 2.1%
Selling, general & administrative. . . . . 8.9% 8.2% 8.7%
----- ----- -----
Operating income. . . . . . . . . . . . . . . 1.6% 4.3% 2.8%
Other . . . . . . . . . . . . . . . . . . . . 0.1% 0.4% 0.7%
----- ----- -----
Earnings before loss on equity investment,
minority interest and taxes on income. . . 1.7% 4.7% 3.5%
Equity in loss of affiliate . . . . . . . . . 8.6% -- --
Loss on closure of Mexican subsidiary . . . . -- 2.5% --
Taxes on income . . . . . . . . . . . . . . . 0.4% 0.9% 1.3%
----- ----- -----
Net earnings (loss) . . . . . . . . . . . . . (7.3%) 1.3% 2.2%
===== ===== =====

For the year ended December 31, 1997, consolidated sales increased $4.0
million (2%) over the amount reported for the same period in the previous
year. For the year ended December 31, 1997, chassis sales declined $8.5
million compared to the amount reported for the same period in the previous
year, with the Emergency Vehicle Group providing approximately $12.5
million in revenues since their acquisition in August of 1997. For the
year ended December 31, 1997, revenues for fire truck chassis and bus
chassis sales declined approximately 17% and 25% respectively, while
motorhome chassis sales increased 12% compared to December 31, 1996. The
reduction in fire truck chassis sales relates to the soft market in 1997
and the reduction in bus chassis sales primarily is attributable to the
decline in transit style bus sales to Carpenter. Currently, Carpenter is
the primary distribution point for school buses and their market share of
transit style buses declined dramatically during 1997. The increase in
motorhome chassis sales directly relates to the revenue and market share
increases by the Company's two largest customers, Fleetwood Motor Home of
Indiana, Inc. and Newmar Corp.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Additionally, with the acquisition of two of the Company's customers,
Luverne and Quality, $3.2 million of chassis that were in the inventory of
the new subsidiaries at December 31, 1997 had to be eliminated from
consolidated revenues. In previous years, these chassis would have been
considered revenues for the Company.

Cost of products sold includes a write-down of inventory in the fourth
quarter of 1997 of approximately $2.4 million that reflects technological
and production changes in the Chassis Group. The write-down of inventory
is the primary reason for the decrease in gross margins from 14.9% in 1996
to 13.1% in 1997. Selling, general and administrative expenses remained
consistent with 1996 with the exception of a write-off of a note receivable
from a customer in 1997 (see Note 12 to the Consolidated Financial
Statements in this Form 10-K).

Interest and other income, net of interest expense, declined $1.3 million
primarily due to the $15.3 million investment in Carpenter and the $4.2
cash consideration paid for the acquisitions of Luverne and Quality. The
Company funded these investments through the liquidation of approximately
$6.0 million of marketable securities, increased borrowings and cash
generated from 1997 operations.

A going concern opinion was issued for Carpenter for the year ended
December 31, 1997. Carpenter incurred operating losses of $22.4 million
and a non-cash impairment loss of $15.4 million for a total loss of $37.8
million for the year ended December 31, 1997.

Consequently, the Company has written down its investment in Carpenter to
zero and has written off the notes receivable from Carpenter for a total
asset reduction of $15.3 million.

The Company believes that the school bus and step van markets are important
markets for the Company and therefore, in conjunction with the other
shareholders and new management of Carpenter, is taking steps to improve
the operations of Carpenter. Carpenter management has begun to dispose of
fixed assets and inventory that are nonessential to continuing operations
and have streamlined their production efforts and reduced production costs.

On March 3, 1998, the shareholders of Carpenter, including the Company,
entered into a Contribution, Subscription and Stock Purchase Agreement
whereby $1.0 million of new capital was invested by two shareholders and a
commitment was made by the third shareholder to invest approximately $0.5
million. Carpenter actively is pursuing refinancing of its entire debt.
Upon the completion of such refinancing, with certain termination rights,
the shareholders have agreed to make additional contributions to Carpenter.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

Sales increased $22.1 million (14%) from $152.6 million for the year ended
December 31, 1995, to $174.7 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 equity purchase in school bus manufacturer Carpenter. (see
Note 5 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 sales, from 97.2% in
1995 to 95.7% in 1996. The closure of Spartan de Mexico illustrated 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 supported the closure of Spartan de Mexico.

Cost of products sold in 1996 was 85.1% of revenues compared to 86.4% 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 8.7% in 1995 to
8.2% of revenues in 1996 primarily as a result of increased revenues.

Research and development costs increased to 2.4% of revenues in 1996 from
2.1% in 1995, which reflected 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 operations increased from 36.9%
in 1995 to 39.8% in 1996. See Note 6 to the Consolidated Financial
Statements in this Form 10-K for a reconciliation of the Company's
effective rate to the statutory rate.

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.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 1997, cash provided by operating activities
was approximately $15.1 million which was $10.4 million greater than the
$4.7 million of cash provided by operating activities for the year ended
December 31, 1996. The Company's working capital declined $13.4 million
from $54.8 million in 1996 to $41.4 million in 1997. See the "Consolidated
Statement of Cash Flows" contained in this Form 10-K for further
information regarding the $0.1 million decrease in cash and cash
equivalents, from $4.9 million for the year ended December 31, 1996, to
$4.8 million for the year ended December 31, 1997. See "Selected Financial
Data" for a five-year comparison of working capital and see Note 5 to the
Consolidated Financial Statements in this Form 10-K for an event affecting
liquidity.

Shareholders' equity decreased approximately $13.9 million to $47.5 million
as of December 31, 1997. This change is the result of the net loss of $13.1
million, dividends of $0.9 million paid on May 20, 1997, $2.1 million to
acquire 308,100 shares of the Company's Common Stock, $0.2 million for the
exercise of stock options and $1.9 million related to the acquisition of
subsidiaries. The Company's debt to equity ratio increased to 20.2% as of
December 31, 1997, compared to 9.4% at December 31, 1996.

The Company's primary unsecured line of credit provides for maximum
borrowings of $20.0 million. The interest rate is 45 basis points above
the 30-day London Inter Bank Offered Rate ("LIBOR"). The Company had
borrowed $9.6 million against the line of credit as of December 31, 1997,
at which time the LIBOR rate was 5.85%. In addition, under the terms of
its credit agreement with its bank, the Company has the ability to issue
letters of credit totaling $0.4 million. At December 31, 1997, the Company
had outstanding letters of credit totaling $0.2 million. The Company also
has unsecured lines of credit at its subsidiary locations for $0.75 million
and $1.0 million. There were no borrowings on these lines at December 31,
1997. The Company believes it has sufficient resources from cash flows
from operating activities and, if necessary, from additional borrowings
under its lines of credit to satisfy ongoing cash requirements for the next
12 months.

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.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

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.

YEAR 2000 COMPLIANCE

The Company is currently in the process of addressing a potential problem
that is facing all users of automated information systems. The problem is
that many computer systems that process transactions based on two digits
representing the year of transaction may recognize a date using "00" as the
year 1900 rather than the year 2000. The problem could affect a wide
variety of automated information systems, such as mainframe applications,
personal computers and communication systems, in the form of software
failure, errors or miscalculations.

The Company established a Year 2000 task force and developed a plan to
prepare for the year 2000 in 1998. This plan began with the performance of
an inventory of software applications and communicating with third party
vendors and suppliers. The Company has a plan, which regularly is updated
and monitored by technical personnel. Plan status regularly is reviewed by
management of the Company.

The Company will continue to assess the impact of the Year 2000 issue on
the remainder of its computer-based systems and applications throughout
1998. The Company's goal is to perform tests of its systems and
applications during 1998 and to have all systems and applications compliant
with the century change by December 31, 1998, allowing 1999 to be used for
full validation and testing.

The costs associated with Year 2000 compliance primarily will consist of
personnel expense for staff dedicated to the effort and professional fees
paid to third party providers of remedial services. It is the Company's
policy to expense such costs as incurred. The Company also may invest in
new or upgraded technology which has definable value lasting beyond 2000.
In these instances, where Year 2000 compliance is merely ancillary, the
Company may capitalize and depreciate such an asset over its estimated
useful life.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

In addition to reviewing its own computer operating systems and
applications, the Company will have formal communications with its
significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to those third parties'
failure to resolve their own Year 2000 issues. There is no assurance that
the systems of other companies on which the Company's systems rely will be
timely converted. If such modifications and conversions are not made, or
are not completed timely, the Year 2000 issue could have an adverse impact
on the operations of the Company.

Based on currently available information, management does not presently
anticipate that the costs to address the Year 2000 issues will have an
adverse impact on the Company's financial conditions, results of operation
or liquidity.

The date on which the Company believes it will complete the Year 2000
modifications are based on management's best estimates. There can be no
guarantee that these estimates will be achieved and actual results could
differ from those anticipated. Specific factors that might cause
differences include, but are not limited to, the ability of other companies
on which the Company's systems rely to modify or convert their systems to
be year 2000 compliant, the ability to locate and correct all relevant
computer code and similar uncertainties.

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about the chassis market, the economy and about Spartan itself.
Words such as "anticipates," "believes," "estimates," "expects,"
"forecasts," "intends," "is likely," "plans," "projects," variations of
such words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions
("Future Factors") that are difficult to predict with regard to timing,
extent, likelihood and degree of occurrence. Therefore, actual results and
outcomes may differ materially from what may be expressed or forecasted in
such forward-looking statements. Spartan undertakes no obligation to
update, amend or clarify forward-looking statements, as a result of new
information, future events or otherwise.

Future Factors that could cause a difference between an ultimate actual
outcome and a preceding forward-looking statement include, but are not
limited to, changes in interest rates; demand for products and services;

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

the degree of competition by competitors; changes in laws or regulations,
including changes related to safety standards adopted by NFPA; changes in
prices, levies and assessments; the impact of technological advances;
government and regulatory policy changes; trends in customer behaviors;
dependence on key personnel; and the vicissitudes of the world and national
economy.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

No information is required to be reported under this item for the fiscal
year ended December 31, 1997.

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

DECEMBER 31,
--------------------------------
ASSETS (NOTE 7) 1997 1996
----------- -----------

CURRENT ASSETS:
Cash and cash equivalents $ 4,812,438 $ 4,912,001
Investment securities (Note 2) 2,893,167 8,955,809
Accounts receivable, less allowance for doubtful accounts
of $924,000 in 1997 and $629,000 in 1996 (Note 8) 26,875,828 26,299,698
Inventories (Note 3) 27,033,117 24,283,517
Deferred tax benefit (Note 6) 2,861,250 1,471,700
Federal taxes receivable 513,379 925,000
Other current assets (Note 12) 591,909 1,063,601
----------- -----------
TOTAL CURRENT ASSETS 65,581,088 67,911,326

PROPERTY, PLANT AND EQUIPMENT, NET (Note 4) 11,891,496 11,403,194
EQUITY INVESTMENT IN AFFILIATE (Note 5) -- --
GOODWILL, net of accumulated amortization of $77,000 3,378,408 --
OTHER ASSETS (Note 12) 394,638 368,249
----------- -----------
TOTAL ASSETS $81,245,630 $79,682,769
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $12,001,995 $ 6,264,362
Other current liabilities and accrued expenses 1,469,211 2,058,820
Accrued warranty 3,070,780 2,002,870
Accrued customer rebates 695,367 480,216
Taxes on income 1,708,090 --
Accrued compensation and related taxes 1,301,525 1,034,496
Accrued vacation 720,788 644,754
Deposits from customers 3,184,367 --
Current portion of long-term debt (Note 7) -- 586,000
----------- -----------
TOTAL CURRENT LIABILITIES 24,152,123 13,071,518

LONG-TERM DEBT, LESS CURRENT PORTION (Note 7) 9,603,785 5,206,631
COMMITMENTS AND CONTINGENT LIABILITIES (Note 11)
21

SHAREHOLDERS' EQUITY (Note 13):
Preferred stock, no par value; 2,000,000 shares
authorized (none issued) -- --
Common stock, $0.01 par value; 23,900,000 shares
authorized, issued 12,335,960 shares and 12,354,072
shares as of December 31, 1997 and 1996, respectively. 123,360 123,541
Additional paid in capital 22,700,965 21,065,942
Retained earnings 24,683,476 40,195,117
Valuation allowance (18,079) 20,020
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 47,489,722 61,404,620
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $81,245,630 $79,682,769
=========== ===========

See notes to consolidated financial statements.

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995
------------ ------------ ------------

SALES $178,641,415 $174,677,163 $152,598,873
COSTS OF PRODUCTS SOLD 155,290,918 148,629,018 131,808,951
------------ ------------ ------------
GROSS PROFIT 23,350,497 26,048,145 20,789,922

OPERATING EXPENSES
Research and development 4,692,527 4,193,639 3,135,059
Selling, general and administrative 15,801,265 14,264,179 13,252,089
------------ ------------ ------------
OPERATING INCOME 2,856,705 7,590,327 4,402,774

OTHER INCOME / (EXPENSE)
Interest expense (846,600) (464,166) (459,100)
Interest and other income 899,314 1,148,807 1,483,528
------------ ------------ ------------
EARNINGS BEFORE LOSS ON CLOSURE OF MEXICAN
SUBSIDIARY, EQUITY IN LOSS OF AFFILIATE AND TAXES
ON INCOME 2,909,419 8,274,968 5,427,202

LOSS ON CLOSURE OF MEXICAN SUBSIDIARY -- 4,422,907 --
------------ ------------ ------------
EARNINGS BEFORE EQUITY IN LOSS OF AFFILIATE AND
TAXES ON INCOME 2,909,419 3,852,061 5,427,202

EQUITY IN LOSS OF AFFILIATE 15,403,616 -- --
------------ ------------ ------------
EARNINGS (LOSS) BEFORE TAXES ON INCOME (12,494,197) 3,852,061 5,427,202

TAXES ON INCOME 630,000 1,532,000 2,000,000
------------ ------------ ------------
NET EARNINGS (LOSS) $(13,124,197) $ 2,320,061 $ 3,427,202
============ ============ ============

BASIC AND DILUTED NET EARNINGS (LOSS) PER SHARE $ (1.06) $ 0.18 $ 0.27
============ ============ ============
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 12,381,000 12,541,000 12,887,000
============ ============ ============

See notes to consolidated financial statements.

SPARTAN MOTORS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

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

Balance at January 1, 1995 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 transla-
tion 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

Change in par value of
common stock to $0.01 (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)
Recognition of 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

Purchase and constructive
retirement of stock (308,100) (3,081) (523,531) (1,525,095) (2,051,707)
Stock options exercised 36,650 367 229,416 229,783
Shares issued in
acquisition of subsidiary 253,338 2,533 1,929,138 1,931,671
Net loss (13,124,197) (13,124,197)
Dividends paid ($0.07 per
share) (862,349) (862,349)
Change in valuation
allowance (net of tax
benefit of $10,300) (38,099) (38,099)
----------- ----------- ----------- ----------- --------- ----------- -----------
Balance at December 31, 1997 12,335,960 $ 123,360 $22,700,965 $24,683,476 $ (18,079) $47,489,722
=========== =========== =========== =========== ========= =========== ===========

See notes to consolidated financial statements.

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

YEARS ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995
------------ ----------- -----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(13,124,197) $ 2,320,061 $ 3,427,202
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,879,071 1,925,353 2,031,808
Gain (loss) on disposal of assets and investment
securities (13,922) 3,752,328 (97,212)
Equity in net loss of affiliate 15,403,616
Decrease (increase) in assets net of effects of
acquisition of subsidiaries:
Accounts receivable 2,320,924 (6,001,433) 3,460,502
Inventories 3,366,899 118,869 (1,545,905)
Deferred tax benefit (1,333,786) (25,928) (297,000)
Federal taxes receivable 411,621 (925,000) 1,323,584
Other assets 1,009,428 235,093 88,354
Increase (decrease) in liabilities net of effects
of acquisition of subsidiaries:
Accounts payable 2,761,539 2,431,913 (3,148,069)
Other current liabilities and accrued expenses (953,161) 1,455,890 (795,383)
Accrued warranty 1,005,793 380,916 (234,404)
Accrued customer rebates 201,063 (550,442) 77,916
Taxes on income 1,564,496 (449,000) 449,000
Accrued vacation 8,668 60,103 105,625
Accrued compensation and related taxes (70,183) (29,438) (148,833)
Deposits from customers 705,390 -- --
------------ ----------- -----------
TOTAL ADJUSTMENTS 28,267,456 2,379,224 1,269,983
------------ ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,143,259 4,699,285 4,697,185
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,626,900) (1,385,064) (1,806,830)
Proceeds of sale of property, plant and equipment 21,589 90,148 257,785
Purchases of investment securities (2,685,732) (4,136,097) (4,603,920)
Proceeds from sales of investment securities 8,691,833 2,762,659 8,763,205
Investment in affiliate (15,283,000) -- --
Advance of note receivable -- (15,000) (678,275)
Principal payment on note receivable -- 1,076,219 752,397
Acquisition of subsidiaries, net of cash received (4,243,728) -- --
------------ ----------- -----------

NET CASH (USED IN) PROVIDED BY
INVESTMENT ACTIVITIES (15,125,938) (1,607,135) 2,684,362
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 18,188,785 -- --
Payments on long-term debt (15,621,396) (419,097) (419,629)
Net proceeds from exercise of stock options 229,783 218,705 114,400
Purchase of treasury stock (2,051,707) (2,553,797) (4,326,487)
Payment of dividends (862,349) (626,679) (645,649)
------------ ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (116,884) (3,380,868) (5,277,365)
EFFECT OF EXCHANGE RATE INCREASE (DECREASE) (1,876) 62,215
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (99,563) (290,594) 2,166,397
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 4,912,001 5,202,595 3,036,198
------------ ----------- -----------
CASH AND CASH EQUIVLANETS AT END OF YEAR $ 4,812,438 $ 4,912,001 $ 5,202,595
============ =========== ===========

Supplemental disclosures: Cash paid for interest was $789,900, $464,100 and
$459,100 for 1997, 1996 and 1995, respectively. Cash paid for income taxes
was $1,488,000, $3,044,000 and $460,000 for 1997, 1996 and 1995,
respectively.

Supplementary disclosures of non-cash activities: See Note 14 for detail of
of non-cash assets and liabilities related to acquisition of subsidiaries.

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 trucks, motorhomes, school buses, transit
buses 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 four wholly owned subsidiaries: Spartan
Motors Foreign Sales Corporation, Inc., Spartan de Mexico, Quality
Manufacturing, Inc. and Luverne Fire Apparatus Co., Ltd. (see Note 14).
All material inter-company transactions have been eliminated. Carpenter
Industries, Inc. ("Carpenter") represents an investment in a 33-1/3% owned
affiliate and, therefore, is accounted for on the equity method (see Note
5). Two joint ventures 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,
1997.

FOREIGN CURRENCY TRANSLATION. The financial position and results of
operations of Spartan de Mexico for 1995 and 1996 were 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. Before 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. The Company considers all investments purchased with a
maturity of three months or less to be cash equivalents.

INVESTMENT SECURITIES are classified as available-for-sale securities and
are reported at fair value, with offsetting adjustments to shareholders'

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

NOTE 1 - GENERAL AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

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.

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.

EARNINGS PER SHARE. The Financial Accounting Standard Board has issued
SFAS No. 128, "Earnings Per Share," which became effective for financial
statements issued after December 15, 1997. The statement replaces the
presentation of primary earnings per share ("EPS") and fully diluted EPS
with a presentation of basic EPS and diluted EPS. The Company adopted SFAS
No. 128 during the fourth quarter of 1997. Adoption of SFAS No. 128 did
not significantly impact the presentation of EPS for the current or prior
years.

Basic earnings (loss) per share represents net income (loss) available to
common shareholders divided by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per share
represents net income (loss) available to common shares outstanding divided
by the weighted average number of common shares outstanding plus the
average dilutive effect of the Company's stock options outstanding (see
Note 10) during the period calculated. The dilutive effect of the
Company's stock options is immaterial for the years ended December 31,
1997, 1996 and 1995, respectively.

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. Two customers represented

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

NOTE 1 - GENERAL AND SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

approximately 34% of the Company's trade accounts receivable at December
31, 1997. At December 31, 1996, two customers represented approximately
32% of the Company's trade accounts receivable.

FINANCIAL INSTRUMENTS. The Company values financial instruments as
required by SFAS No. 107 "Disclosures about Fair Values of Financial
Instruments." The carrying amounts of cash and cash equivalents and
accounts and notes receivable approximate fair value. The Company
estimated 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. The variable-rate line of credit is
tied to a floating LIBOR rate and, therefore, approximates market 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.

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. 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 1997.

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

NOTE 2 - INVESTMENT SECURITIES

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

DECEMBER 31, 1997
--------------------------------------------------------
GROSS UNREALIZED
--------------------- ESTIMATED
COST GAIN (LOSS) FAIR VALUE
---------- ------ -------- ----------

Municipal bonds $2,921,610 $5,601 $(34,044) $2,893,167
---------- ------ -------- ----------

TOTAL $2,921,610 $5,601 $(34,044) $2,893,167
========== ====== ======== ==========

DECEMBER 31, 1997
--------------------------------------------------------
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
========== ======= ======== ==========

The maturity distribution of investments at December 31, 1997 is shown
below.

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

NOTE 2 - INVESTMENT SECURITIES (CONTINUED)

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

Under 1 year
1 year - 5 years $2,521,610 $2,493,167
5 years - 10 years -- --
Over 10 years 400,000 400,000
---------- ----------
TOTAL $2,921,610 $2,893,167
========== ==========

The Company computes gains and losses on dispositions of investment
securities using the specific identification method. Gains of
approximately $48,000, $19,000 and $43,000, and losses of approximately
$64,000, $6,000 and $28,000 were realized from sales of investment debt
securities during 1997, 1996 and 1995, respectively.

The Company recognized investment income from investment securities of
approximately $354,000, $688,900 and $772,000 during 1997, 1996 and 1995,
respectively.

NOTE 3 - INVENTORIES

Inventories are summarized as follows:

DECEMBER 31,
-----------------------------
1997 1996
----------- -----------

Finished goods $ 2,801,432 $ 2,449,406
Raw materials and purchased components 21,721,297 22,057,444
Work in process 3,612,888 528,667
Obsolescence reserve (1,102,500) (752,000)
----------- -----------
TOTAL $27,033,117 $24,283,517
=========== ===========

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

NOTE 3 - INVENTORIES (CONTINUED)

Substantially all inventories are valued at the lower of LIFO cost or
market. For 1997 and 1996, 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, 1997, 1996 and 1995.

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

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

DECEMBER 31,
-----------------------------
1997 1996
----------- -----------

Land and improvements $ 973,994 $ 1,167,358
Buildings and improvements 10,556,411 8,063,009
Plant machinery and equipment 3,258,770 2,416,422
Furniture and fixtures 5,705,664 6,660,117
Vehicles 1,130,514 1,073,300
----------- -----------

TOTAL 21,625,353 19,380,206
Less accumulated depreciation 9,733,857 7,977,012
----------- -----------

NET PROPERTY, PLANT AND EQUIPMENT $11,891,496 $11,403,194
=========== ===========

The above balances include idle assets related to Spartan de Mexico with a
net book value of approximately $0.5 million, which are currently for sale.

NOTE 5 - EQUITY INVESTMENT IN AFFILIATE

In January 1997, the Company acquired a 33-1/3% interest in Carpenter for
approximately $10.0 million. Carpenter is a manufacturer of school bus
bodies and chassis. The Company increased their investment in Carpenter by
$3.0 million during the year. Carpenter also borrowed $2.4 million from
33

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

NOTE 5 - EQUITY INVESTMENT IN AFFILIATE (CONTINUED)

the Company. These notes receivable were converted into an equity
investment in Carpenter subsequent to year-end. The Company accounts for
its investment in Carpenter using the equity method of accounting. A
summary of Carpenter's balance sheet and the results of its operations as
of December 31, 1997 as follows:

DECEMBER 31, 1997
-----------------

BALANCE SHEET
Current Assets $25,192,000
Total Assets 41,980,000
Current Liabilities 38,344,000
Total Liabilities 51,280,000
Shareholders' Equity (9,300,000)
Total Liabilities and Equity 41,980,000

INCOME STATEMENT
Revenues $76,645,000
Loss from Operations (33,821,000)
Net Loss (37,788,000)

A going concern opinion was issued for Carpenter for its year ended
December 31, 1997. Therefore, the Company's investment in Carpenter has
been impaired. The Company has written down its investment in Carpenter
to zero and has written off their notes receivable from Carpenter.
Subsequent to year end, the Company contributed an additional $0.5
million of equity to Carpenter.

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

NOTE 6 - TAXES ON INCOME

Income tax expense (credit) is summarized as follows:

DECEMBER 31,
-------------------------------------------
1997 1996 1995
----------- ---------- ----------

Current:
Federal $ 2,053,000 $1,450,000 $2,176,000
State (23,000) 204,000 121,000
----------- ---------- ----------
Total current 2,030,000 1,654,000 2,297,000
Deferred:
Federal $(1,297,000) $ (102,000) $ (230,000)
State (103,000) (20,000) (67,000)
----------- ---------- ----------
Total deferred (1,400,000) (122,000) (297,000)
----------- ---------- ----------

TOTAL PROVISION FOR INCOME TAXES $ 630,000 $1,532,000 $2,000,000
=========== ========== ==========

Income before income taxes:

DECEMBER 31,
-------------------------------------------
1997 1996 1995
----------- ---------- ----------

Domestic $(12,494,197) $9,501,261 $6,082,575
Foreign -- (5,649,200) (655,373)
------------ ---------- ----------
TOTAL PRETAX INCOME (LOSS) $(12,494,197) $3,852,061 $5,427,202
============ ========== ==========

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

NOTE 6 - TAXES ON INCOME (CONTINUED)

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

1997 1996 1995
---------------------- --------------------- --------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------ ---------- ------ ---------- ------ ----------

Federal income taxes at the
statutory rate $(4,248,000) (34.00)% $1,310,000 34.00% $1,845,000 34.00%
Increase (decrease) in income
taxes resulting from:
Loss of foreign subsidiary
not deductible for U.S.
tax purposes -- -- 280,000 7.30 229,000 4.20
Valuation for equity in
loss of affiliate 5,237,000 41.92
Foreign Sales Corporation (37,000) (0.30) (70,000) (1.80) (86,000) (1.60)
Nondeductible expenses 33,000 0.26 40,000 1.00 33,000 0.60
Stock compensation expense (22,000) (0.18) (7,000) (0.20) (10,000) (0.20)
State tax expense (158,000) (1.26) 121,000 3.10 54,000 1.00
Municipal income (121,000) (0.97) (131,000) (3.40) (134,000) (2.40)
Other (54,000) (0.43) (11,000) (0.20) 69,000 1.30
----------- ------ ---------- ----- ---------- -----
TOTAL $ 630,000 5.04% $1,532,000 39.80% $2,000,000 36.90%
=========== ====== ========== ===== ========== =====

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

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

NOTE 6 - TAXES ON INCOME (CONTINUED)

DECEMBER 31,
----------------------------
1997 1996
---------- ----------

Current Asset (Liability)
Additional capitalized inventory costs $ 121,000 $ 112,000
Vacation accrual 107,000 88,000
Warranty reserve 1,096,000 681,000
Inventory allowance 1,244,000 256,000
Bonus accrual -- 115,000
Allowance for doubtful accounts 337,000 214,000
Valuation allowance for investments 10,300 (10,300)
Other (54,050) 16,000
---------- ----------
TOTAL $2,861,250 $1,471,700
========== ==========

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

NOTE 7 - LONG-TERM DEBT

Long-term debt consists of the following: DECEMBER 31,
---------------------------
1997 1996
---------- ----------

Revolving note payable to bank, with interest
payable monthly at 45 basis points above the
LIBOR rate, which was 5.85% at December 31,
1997, due November 2000, uncollateralized $9,603,785
Note payable to Michigan Strategic Fund, interest at
85% of prime, which was 8.5% at December 31,
1996, payable in monthly installments of approxi-
mately $13,300 plus interest through November 2006;
collateralized by building $1,586,687
Note payable to Michigan Strategic Fund, interest at 85%
of prime, payable in monthly installments of approxi-
mately $14,100 plus interest through December 1998;
collateralized by accounts receivable, inventory and
equipment 329,661
Note payable to bank, with interest payable monthly at
LIBOR plus 2.25%, due December 1999, uncollateralized 2,100,000
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
---------- ----------
TOTAL $9,603,785 $5,792,631

Less current portion of long-term debt -- 586,000
---------- ----------
TOTAL $9,603,785 $5,206,631
========== ==========

The Company's primary line of credit is a $20.0 million revolving note
payable to a bank. Under the terms of the line of credit agreement, the
Company is required to maintain certain financial ratios and other
financial conditions. The agreement also prohibits the Company from
incurring additional indebtedness, limits certain acquisitions,
investments, advances or loans and restricts substantial asset sales. At
December 31, 1997 the Company was not in compliance with the following

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

NOTE 7 - LONG-TERM DEBT (CONTINUED)

covenants: funded debt ratio; minimum tangible net worth; and limitations
on investments, loans and advances. A waiver and amendment has been
obtained from the bank for these violations. The Company also has unsecured
lines of credit at its subsidiary locations for $0.75 million and $1.0
million. These lines carry an interest rate of a 1/2% above the bank's
prime rate (prime rate at December 31, 1997, was 9.00%) and 1% above the
bank's prime rate (prime rate at December 31, 1997 was 8.5%), respectively.
The $0.75 million line has an expiration date of June 1, 1998. The $1.0
million line expires only if there is a change in management. There were
no borrowings on these lines at December 31, 1997.

NOTE 8 - TRANSACTIONS WITH MAJOR CUSTOMERS

The Company had two customers classified as major customers in 1997 and
1996 and three in 1995:

1997 1996 1995
-------------------------- -------------------------- ------------------------
ACCOUNTS ACCOUNTS ACCOUNTS
CUSTOMER SALES RECEIVABLE SALES RECEIVABLE SALES RECEIVABLE
- -------- ----- ---------- ----- ---------- ----- ----------

A. . . . . . . $46,800,000 $6,900,000 $32,800,000 $3,660,000 $19,742,000 $1,711,000
B. . . . . . . 30,900,000 2,188,000 23,500,000 1,783,000 19,375,000 738,000
C. . . . . . . 15,274,000 630,000

NOTE 9 - PROFIT-SHARING PLAN

The Spartan Motors, Inc. Profit-Sharing Plan and Trust covers all Company
employees whom meet length of service and minimum age requirements.
Contributions to the plan are determined annually by the Board of Directors
and were $0.3 million, $0.3 million and $0.24 million for 1997, 1996 and
1995, respectively. The Company's policy is to fund plan costs accrued.

NOTE 10 - STOCK OPTIONS

The Company has incentive stock option plans covering certain employees.
Shares reserved for options under these plans total 3,100,000. The options
granted subsequent to January 1, 1991 are exercisable for a period of 10
39

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

NOTE 10 - STOCK OPTIONS (CONTINUED)

years from the grant date. The options granted before 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 has a stock option and a restricted stock plan for outside
market advisors. Shares reserved for options under this plan total 200,000
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 grant date.

The Company 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, 1997, 1996 and 1995 is as
follows:

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

NOTE 10 - STOCK OPTIONS (CONTINUED)

INCENTIVE STOCK NON-QUALIFIED STOCK OUTSIDE ADVISOR STOCK
OPTION PLAN OPTION PLAN OPTION PLAN
------------------------ ----------------------- ---------------------------
WEIGHTED-AVERAGE OPTION WEIGHTED-AVERAGE OPTION WEIGHTED-AVERAGE OPTION
EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES
-------------- ------ -------------- ------ ---------------- ------

Balance at January 1, 1995 $11.18 764,539 $10.54 90,500 --

Options granted $ 8.84 430,500
Options exercised $ 8.80 (13,000)
Options canceled $13.25 (39,050) $ 8.80 (9,850)
--------- ------- ------

Balance at December 31, 1995 $11.07 725,489 $ 9.16 498,150 --
========= ======= ======

Options granted $ 6.75 307,900 $ 6.82 87,000 $6.56 30,000
Options exercised $ 6.75 (12,000) $ 8.41 (18,200)
Options canceled $13.07 (110,850) $ 8.93 (53,000)
--------- ------- ------

Balance at December 31, 1996 $ 9.42 910,539 $ 6.95 513,950 $6.56 30,000
========= ======= ======

Options granted $ 7.75 390,300 $ 6.94 30,100 $6.13 33,000
Options exercised $ 6.75 (33,150) $ 1.73 (3,500)
Options canceled $11.66 (95,550) $ 8.80 (41,500)
Options expired $13.93 (19,145)
--------- ------- ------

Exercisable at December 31,
1997 $ 8.67 1,152,994 $ 6.84 499,050 $ 6.33 63,000
========= ======= ======

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

NOTE 10 - STOCK OPTIONS (CONTINUED)

Exercise prices for options outstanding under the incentive plan at December
31, 1997 ranged from $13.25-$20.90 for 532,694 shares and $6.75-$7.75 for the
remaining shares. Exercise prices for options outstanding under the non-
ualified plan at December 31, 1997 were stated at $1.73 for 20,250 shares,
ranged from $10.50-$14.50 for 76,250 shares and ranged from $6.75-$7.75 for
the remaining shares. Exercise prices for options outstanding under the outside
advisor plan at December 31, 1997 ranged from $6.125-$6.56. The estimated fair
value of options granted in 1997, 1996 and 1995 ranges from $6.02 per share to
$8.23 per share. The Company follows APB No. 25 and related 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, 1997, would have been reduced to the PRO FORMA amounts
indicated below.

1997 1996
------------ ----------

Net Earnings
As reported $(13,124,197) $2,320,061
PRO FORMA (13,213,278) 2,192,945

Net Earnings Per Share
As reported $(1.06) $0.18
PRO FORMA (1.07) 0.17

The fair market value of options granted under the Company's stock option
plans during 1997 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 26.9%; risk
free interest rate of 6.5%; and expected lives of three to four years.

Stock options exercisable are the only reconciling item between basic and
diluted weighted average common shares outstanding. The dilutive effect on
the number of shares outstanding is immaterial and results in no difference
between basic earnings per share and diluted earnings per share.

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 $0.4 million. At December 31,
1997, the Company had outstanding letters of credit totaling $0.2 million.
42

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

NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

At December 31, 1997, 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, 1997, was
approximately $6.9 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 position
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 was established. Additionally,
the Company entered into a term agreement with such entity. During 1997,
the above notes receivable were determined to be impaired due to the
deterioration of the entity's business. Consequently, these balances, $1.0
million and $0.56 million, respectively, were written-off in the current
year. Subsequent to year-end, the Company foreclosed on the entity's
assets.

NOTE 13 - PURCHASE OF TREASURY STOCK

On November 14, 1994, the Board of Directors authorized management to
repurchase up to 100,000 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.

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.

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

NOTE 13 - PURCHASE OF TREASURY STOCK (CONTINUED)

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. During
1997 the Company repurchased 308,100 shares at an average market price of
approximately $6.66 per share. All treasury stock has been constructively
retired in accordance with the Michigan Business Corporation Act applicable
to all Michigan corporations.

NOTE 14 - ACQUISITIONS

During the third quarter of 1997, the Company completed the acquisitions of
two fire truck apparatus manufacturers. On August 21, 1997, the Company
purchased all of the outstanding stock of Luverne Fire Apparatus Co., Ltd.
On August 14, 1997, the Company acquired all of the outstanding stock of
CTS Holding Company, Inc. ("CTS") in connection with the acquisition of
Quality Manufacturing, Inc., a wholly owned subsidiary of CTS. On August
15, 1997, CTS was merged with and into Spartan Quality, Inc., a newly
formed corporation and wholly owned subsidiary of the Company.
Subsequently, the name of that company was changed to Quality
Manufacturing, Inc. The purchase price paid for the two companies was
approximately $6.3 million, including cash consideration of approximately
$4.4 million with the balance funded through the issuance of 253,338 shares
of the Company's Common Stock. The fair market value of the Company's
Common Stock on the effective date of the transaction was $7-5/8 per share.
Funds for the payment of the purchase price were provided primarily through
cash from operations.

The acquisitions were accounted for using the purchase method and,
accordingly, the assets and liabilities of the acquired entities have been
recorded at their estimated fair value at the date of acquisition. The
excess of purchase price over the estimated fair value of the net assets
acquired, approximately $3.5 million, has been recorded as goodwill, which
will be amortized over 15 years. The fair values of the assets acquired
and the liabilities assumed were as follows: current assets of
approximately $10.0 million; property, plant and equipment of approximately

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

NOTE 14 - ACQUISITIONS (CONTINUED)

$0.7 million; other assets of $26,318; current liabilities of approximately
$6.9 million; and long-term liabilities of approximately $0.8 million.

The following unaudited pro forma results of operations for the years ended
December 31, 1997 and 1996, assume the acquisitions occurred at the
beginning of the respective periods. These unaudited pro forma results
have been prepared for comparative purposes only and do not purport to
be indicative of what would have occurred had the acquisitions been in
effect on the dates indicated, or of the results which may occur in the
future.

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996
------------ ------------

Net sales $193,212,000 $157,758,000
Net earnings (loss) (12,019,000) 3,986,000
Basic and diluted earnings (loss) per share $ (0.97) $ 0.32

NOTE 15 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued two new pronouncements
that apply to the Company. Statement of Financial Accounts Standards
(SFAS) No. 130 "Reporting Comprehensive Income" requires companies to
classify items of other comprehensive income by their nature in a financial
statement and to display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in-capital in
the equity section of a statement of financial position. This statement is
effective for fiscal years beginning after December 15, 1997. The Company
will adopt SFAS No. 130 in 1998.

SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" requires that public business enterprises report financial and
descriptive information about its reportable operating segments. SFAS No.
131 also requires that public business enterprises report certain
information about their products and services, the geographic areas in
which they operate, and their major customers. This statement is effective
for fiscal years beginning after December 15, 1997. The Company will adopt
SFAS No. 131 in 1998.

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

NOTE 15 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Management has determined that the effects on the financial statements from
the adoption of these statements will not be material.

NOTE 16 - SUBSEQUENT EVENTS

On January 7, 1998, the Company completed the acquisition of Road Rescue,
Inc., a manufacturer of emergency vehicles including ambulances, rescue
vehicles and critical care units. The acquisition will be accounted for as
a purchase. As such, the excess of the purchase price over the estimated
fair value of the acquired net assets, which approximates $2.3 million,
will be recorded as goodwill. The acquisition was financed with cash
consideration of $1.7 million with the balance funded through the issuance
of 240,000 shares of the Company's Common Stock.

The following unaudited pro forma results of operations of the Company give
effect to the acquisitions of Road Rescue, Inc., Luverne Fire Apparatus
Co., Ltd. and Quality Manufacturing, Inc. as though the transactions had
occurred on January 1, 1996. These unaudited pro forma results have been
prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisitions been in effect on the
dates indicated, or of the results which may occur in the future.

FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996
------------ ------------

Net sales $213,181,000 $176,163,000
Net earnings (loss) (11,617,000) 4,169,000
Basic and diluted earnings (loss) per share $ (0.94) $ 0.33

NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for the year ended December 31, 1997,
is as follows:

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

NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)

QUARTER ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
----------- ----------- ----------- ------------
(as restated) (as restated) (as restated)

Revenues $46,160,497 $39,468,601 $38,479,206 $ 55,432,425
Expenses 43,345,656 38,574,773 37,577,086 57,133,795
----------- ----------- ----------- ------------
Earnings (loss) before equity in
loss of affiliate and taxes
on income 2,814,841 893,828 902,120 (1,701,370)
Equity in loss of affiliate 1,669,201 961,770 2,134,322 10,638,323
Taxes on income 1,095,000 353,400 226,124 (1,044,524)
----------- ----------- ----------- ------------
NET EARNINGS (LOSS) $ 50,640 $ (421,342) $(1,458,326) $(11,295,169)
=========== =========== =========== ============
BASIC AND DILUTED NET
EARNINGS (LOSS) PER SHARE $ 0.01 $ (0.03) $ (0.12) $ (0.91)
=========== =========== =========== ============
- --------------------

Prior to the completion of the Company's audit process for the 1997 fiscal year, the management at the Company's 33-1/3%
owned affiliate, Carpenter, determined that certain adjustments it recorded in the fourth quarter should have been recorded
in previous quarters. These errors in prior quarters consisted primarily of: (i) improper recording of payments on accounts
receivable; (ii) improper reductions of warranty and inventory obsolescense reserves; (iii) improper revenue recognition; and
(iv) relieving inventory using incorrect costs. Accordingly, the equity in loss of affiliate for each of the first three
quarters in the year ended December 31, 1997 has been restated. A summary of the significant effects of this restatement on
the Company's financial statements is as follows. The change in the equity in loss of affiliate is the only component of the
change in the net earnings (loss) noted below for the Company.

QUARTER ENDED
------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30,
1997 1997 1997
------------------------------------

Net earnings (loss) as previously reported $ 796,205 $ 587,007 $ (464,802)
Net earning (loss), as restated 50,640 (421,342) (1,458,326)
Basic and diluted net earnings (loss) per share
as previously reported $ 0.06 $ 0.05 $ (0.04)
Basic and diluted net earnings (loss) per share
as restated 0.01 (0.03) (0.12)
47

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

NOTE 17 - QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)

Includes the results of Quality Manufacturing, Inc. and Luverne Fire
Apparatus Co., Ltd. from date of acquisition (August 14 and August 21,
1997, respectively) through the end of the year.
Includes the write-off of $4.4 million of inventory and accounts and
notes receivable.

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)
=========== =========== =========== ===========

BASIC AND DILUTED
NET EARNINGS (LOSS)
PER SHARE $ 0.10 $ 0.09 $ 0.10 $ (0.09)
=========== =========== =========== ===========

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Spartan Motors, Inc.
Charlotte, Michigan

We have audited the accompanying consolidated balance sheets of Spartan
Motors, Inc. (the "Company") and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1997. 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 did
not audit the financial statements of Carpenter Industries, Inc.
("Carpenter"), the Company's investment in which is accounted for by use of
the equity method. The Company's equity of $15,403,616 in Carpenter's net
loss for the year ended December 31, 1997 is included in the accompanying
financial statements. The financial statements of Carpenter were audited
by other auditors whose report (which includes an explanatory paragraph
describing matters that raised substantial doubt about Carpenter's ability
to continue as a going concern) has been furnished to us, and our opinion,
insofar as it relates to the amounts included for such company, is based
solely on the report of such other auditors.

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
and the report of the other auditors provide a reasonable basis for our
opinion.

In our opinion, based on our audits and the report of the other auditors,
such consolidated financial statements present fairly, in all material
respects, the financial position of Spartan Motors, Inc. and subsidiaries
as of December 31, 1997 and 1996, and the results of their operations and
their cash flows for each of the three years in the period ended December
31, 1997 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.

DELOITTE & TOUCHE LLP
Lansing, Michigan
March 17, 1998

BIRK GROSS BELL & COULTER, P.C.
CERTIFIED PUBLIC ACCOUNTANTS/BUSINESS CONSULTANTS
===========================================================================
Bradley S. Bell, CPA Steven A. Eichenberger, CPA
Jeffrey W. Birk, CPA Howard I. Gross, CPA, CFB, ABV
Jeffrey L. Coulter, CPA Steven W. Reed, CPA, ABV

10 W. MARKET, 2300 MARKET TOWER - INDIANAPOLIS, IN 46204 - 317-633-4700
300 S. MADISON, SUITE 410 - GREENWOOD, IN 46142 - 317-887-4072
FAX - 317-638-5217

INDEPENDENT AUDITORS' REPORT

Board of Directors
Carpenter Industries, Inc.
Richmond, Indiana

We have audited the accompanying balance sheet of Carpenter Industries,
Inc. as of December 31, 1997 and the related statements of operations, cash
flows and changes in shareholders' deficit for the year then ended. Our
audit included the financial statement schedule presented in Appendix A.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audit.

We conducted our audit 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 statements presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Carpenter Industries,
Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information
set for the therein.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2,

conditions exist which raise substantial doubt about its ability to
continue as a going concern unless it is able to obtain or generate
sufficient cash flow to meet its obligations and sustain its operations.
Management's plans in regard to these matters are also described in Note 2.
The financial statements do not include any adjustment that might result
from the outcome of this uncertainty.

/s/ Birk Gross Bell & Coulter, P.C.

March 17, 1998
Indianapolis, Indiana

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 May 19,
1998, 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 May 19, 1998, 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 May 19, 1998, is here incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information contained under the caption "Certain Relationships and
Related Transactions" in the definitive Proxy Statement for its annual
meeting of shareholders to be held on May 19, 1998, is here incorporated by
reference.

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, 1997 and December 31,
1996

Consolidated Statements of Operations for the Fiscal Years Ended
December 31, 1997, December 31, 1996 and December 31, 1995

Consolidated Statements of Shareholders' Equity for the Fiscal Years
Ended December 31, 1997, December 31, 1996 and December 31, 1995

Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 1997, December 31, 1996 and December 31, 1995

Notes to Consolidated Financial Statements as of December 31, 1997

Report of Deloitte & Touche LLP

Report of Birk Gross Bell & Coulter, P.C.

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 DOCUMENT

2.1 Investment Agreement dated December 23, 1996, among
Recovery Equity Investors II, LP, 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.

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.

4.4 Rights Agreement dated June 4, 1997, between Spartan
Motors, Inc. and American Stock Transfer and Trust Company.
Previously filed as an Exhibit to the Company's Form 8-A
filed on June 25, 1997, 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.

21 Subsidiaries of Registrant.

23.1 Consent of Deloitte & Touche LLP.

23.2 Consent of Birk Gross Bell & Coulter, P.C.

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.

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 30, 1998 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 30, 1998 By /S/ GEORGE W. SZTYKIEL
George W. Sztykiel, Director
(Principal Executive Officer)

March 30, 1998 By /S/ JOHN E. SZTYKIEL
John E. Sztykiel, Director
(Principal Operating Officer)

March 30, 1998 By /S/ RICHARD J. SCHALTER
Richard J. Schalter
(Principal Accounting and Financial
Officer)

March 30, 1998 By /S/ WILLIAM F. FOSTER
William F. Foster, Director

March 30, 1998 By /S/ ANTHONY G. SOMMER
Anthony G. Sommer, Director

March 30, 1998 By /S/ GEORGE TESSERIS
George Tesseris, Director

March 30, 1998 By /S/ CHARLES E. NIHART
Charles E. Nihart, Director

March 30, 1998 By /S/ DAVID R. WILSON
David R. Wilson, Director

March 30, 1998 By /S/ JAMES C. PENMAN
James C. Penman, Director

EXHIBIT INDEX

EXHIBIT
NUMBER DOCUMENT

2.1 Investment Agreement dated December 23, 1996, among Recovery
Equity Investors II, LP, 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.

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.

4.4 Rights Agreement dated June 4, 1997, between Spartan Motors,
Inc. and American Stock Transfer and Trust Company.
Previously filed as an Exhibit to the Company's Form 8-A
filed on June 25, 1997, 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.

10.4 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.

10.7 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.

23.1 Consent of Deloitte & Touche, LLP

23.2 Consent of Birk Gross Bell & Coulter, P.C.

27 Financial Data Schedule.

- ---------------

Management contract or compensatory plan or arrangement.

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

YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

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, 1997:

Allowance for doubtful accounts $ 630,326 $ 509,691 $ 215,953 $ 924,064
Inventory obsolescence reserve 767,404 3,585,956 3,250,860 1,102,500
Warranty Reserves 2,124,987 4,587,001 3,641,208 3,070,780

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

                                                                  EXHIBIT 21


                   SUBSIDIARIES OF SPARTAN MOTORS, INC.


                                                     JURISDICTION OF
        NAME OF SUBSIDIARY                           INCORPORATION 

Spartan Motors Foreign Sales Corporation, Inc.       West Indies

Spartan de Mexico S.A. de C.V.                       Mexico

Luverne Fire Apparatus Co., Ltd.                     South Dakota, United
                                                      States

Quality Manufacturing, Inc.                          Alabama, United
                                                      States

Road Rescue, Inc.                                    Minnesota, United States


                               EXHIBIT 23.1


INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Shareholders of
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 17,
1998, appearing in the Annual Report on Form 10-K of Spartan Motors,
Inc. for the year ended December 31, 1997.

/s/Deloitte & Touche LLP

Lansing, Michigan
March 30, 1998


                              EXHIBIT 23.2

     Birk Gross Bell & Coulter, P.C.
     CERTIFIED PUBLIC ACCOUNTANTS / BUSINESS CONSULTANTS
- -----------------------------------------------------------------------
10 W. MARKET, 2300 MARKET TOWER - INDIANAPOLIS, IN 46204 - 317-633-4700
         300 S. MADISON, SUITE 410 - GREENWOOD, IN 46142 - 317-887-4072
                                                     FAX   317-638-5217


                 CONSENT OF 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 17,
1998, (which report expresses an unqualified opinion and includes an
explanatory paragraph which indicates that there are matters that raise
substantial doubt about Carpenter Industries, Inc.'s ability to continue as
a going concern) appearing in this Annual Report on Form 10-K of Spartan
Motors, Inc. for the year ended December 31, 1997.



/s/ Birk Gross Bell & Coulter, P.C.


Indianapolis, Indiana
March 30, 1998











AN INDEPENDENT MEMBER OF
BDO
SEIDMAN                           Members: Division for CPA Firms American
ALLIANCE                          Institute of Certified Public Accountants

 

                                                                 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,
          1997, 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
                                                            4,812,438
                                                      2,893,167
                                                    26,875,828
                                                        924,000
                                                      27,033,117
                                                 65,581,088
                                                           11,891,496
                                                    9,733,857
                                                   81,245,630
                                            24,152,123
                                                          9,603,785
                                                                   0
                                                     0
                                                               0
                                                       47,366,362
                                     81,245,630
                                                         178,641,415
                                                179,540,729
                                                           155,290,918
                                                   155,290,918
                                                 21,340,392
                                                    924,000
                                                  846,600
                                                   2,909,419
                                                        630,000
                                             (13,124,197)
                                                            0
                                                           0
                                                                 0
                                                    (13,124,197)
                                                         (1.06)
                                                         (1.06)