GENERAL CHEMICAL GROUP INC, 10-K405, 1998-03-30

GENERAL CHEMICAL GROUP INC
10-K405, 1998-03-30
INDUSTRIAL INORGANIC CHEMICALS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

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(MARK ONE)
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
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13404
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THE GENERAL CHEMICAL GROUP INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 02-0423437
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

LIBERTY LANE 03842
HAMPTON, NEW HAMPSHIRE (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 929-2606
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, par value $.01 per share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

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 periods 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 is not contained in the
definitive information statement incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]

The aggregate value of the voting stock held by non-affiliates of the
registrant as of March 1, 1998, was approximately $600,044,292.

The number of outstanding shares of the Registrant's Common Stock as of
March 1, 1998 was 11,203,825 shares of Common Stock, $.01 par value per share.

The number of outstanding shares of the Registrant's Class B Common Stock
as of March 1, 1998 was 9,758,421 shares of Class B Common Stock, $.01 par value
per share.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 12, 1998 are incorporated by reference into Part
III.

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PART I

ITEM 1. BUSINESS

GENERAL

The General Chemical Group Inc. (the 'Company'), which has a history dating
back to 1899, is a diversified manufacturing company predominantly engaged in
the production of inorganic chemicals, with manufacturing facilities located in
the United States and Canada. Through its Chemical Segment, the Company is a
leading producer of soda ash in North America, and a major North American
supplier of calcium chloride, sodium and ammonia salts, sulfites, nitrites,
aluminum-based chemical products, printing plates and refinery and chemical
regeneration services to a broad range of industrial and municipal customers.
Through its Manufacturing Segment, the Company manufactures precision and highly
engineered stamped and machined metal products, principally automotive engine
parts.

The Company was organized in 1988 as a Delaware corporation. The Company's
principal operating subsidiaries were transferred in 1986 by AlliedSignal to a
predecessor of the Company, at which time new operating management was
installed. On May 15, 1996, the Company and a then principal stockholder
completed an initial public offering of Common Stock at $17.50 per share.

For certain information concerning the Company's revenue, operating profit
and identifiable assets attributable to each of the Company's segments,
geographic areas and the amount of export revenues in the aggregate to which
such revenues were made, see Note 15 of Notes to the Consolidated Financial
Statements.

CHEMICAL SEGMENT

INDUSTRIAL CHEMICALS

Soda ash and calcium chloride comprise the Company's industrial chemical
product lines. The Company is the second largest producer of soda ash in the
U.S. and Canada and is the only producer of both synthetic and natural soda ash
in North America. General Chemical (Soda Ash) Partners ('GCSAP'), the Company's
51 percent-owned partnership, produces natural soda ash by refining mined trona
deposits at its plant in Green River, Wyoming. The Green River basin, where all
but one of the U.S. producers of natural soda ash are located, contains the
largest known economically recoverable trona deposits in the world. Soda ash is
also produced by the Company's Canadian subsidiary, General Chemical Canada Ltd.
('GC Canada') at its plant in Amherstburg, Ontario, by using the synthetic
process. This production process, which is energy and labor intensive, is
considerably more costly than refining natural soda ash. The Amherstburg plant
remains profitable due to its operating efficiency, successful marketing of
calcium chloride, a co-product, and favorable freight rates to major Canadian
soda ash markets. GC Canada is the largest producer of calcium chloride in
Canada.

Soda Ash. The major use of soda ash is in the production of glass bottles
and other glass containers. Soda ash is also used in the manufacture of windows,
mirrors, fiberglass, television tubes, lighting ware, tableware, glassware and
laboratory ware. The chemical industry uses soda ash in the production of sodium
bicarbonate, sodium phosphates, sodium silicates and chrome chemicals. The
detergent industry often uses soda ash as the prime alkali to make phosphates
and silicates for dry detergent applications. Soda ash is also used, to a lesser
extent, by the water treatment industry to control pH levels and by the pulp and
paper industries in the pulping of wood fiber.

Due to the low-cost position of the U.S. natural soda ash producers, the
export market has grown significantly and now accounts for approximately forty
percent of U.S. production. The Company, along with the other five U.S.
producers of natural soda ash, exports soda ash through the American Natural
Soda Ash Corporation ('ANSAC'), an export organization organized in 1984 under
the Webb-Pomerrene Act. ANSAC ships to virtually all parts of the world except
Canada and Western Europe. Each individual member's allocation of ANSAC volume
is based on the member's total nameplate capacity, with any member's expansion
phased in over a multi-year period for allocation purposes.

Calcium Chloride. Calcium chloride is used predominantly for dust control
and roadbed stabilization on unpaved roads in the summer, and for melting ice on
highways in the winter. Although

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the summer road market is the dominant end use in the Canadian market, the
winter deicing market and industrial applications are the major end-use markets
in the U.S. Industrial applications include asphalt recycling, water treatment
and concrete and drilling mud additives.

DERIVATIVE PRODUCTS AND SERVICES

The Company's derivative products and services product lines include a wide
variety of products such as sulfuric acid, sodium and ammonia salts, sulfites,
aluminum-based chemical products and nitrites that are derived principally from
the production of soda ash and the regeneration of sulfuric acid. These products
are categorized into five major product lines with end markets including
refinery and chemical sulfuric acid regeneration, water treatment, photo
chemicals, pulp and paper, chemical processing, semiconductor devices and
printing.

Refinery and chemical regeneration services. Refineries use sulfuric acid
as an alkylation process catalyst in the production of high-quality, high-octane
and low-vapor-pressure gasoline. The alkylation process contaminates and dilutes
the sulfuric acid catalyst, generating an 85 percent to 90 percent spent
sulfuric acid stream, which is then removed from the refineries via pipeline or
tank truck. The Company thermally decomposes the spent acid to regenerate fresh
sulfuric acid, which is then recycled back to the refinery. A similar service is
provided to the chemical industry for the manufacture of ion exchange resins,
silicone polymers, liquid detergents and surfactants.

Water Treatment. The Company, through its broad geographic network of 33
strategically located plants, is the largest North American producer of aluminum
sulfate ('alum'). Municipalities, which use alum as a flocculant and coagulant
in the treatment of water and waste water, are the predominant customers. Other
products sold to the water treatment market include sodium and ammonia salt and
sulfite products, which are used in dechlorination and to inhibit the corrosion
of steel lines and equipment.

Photo Chemicals. Sodium and ammonia sulfites and bisulfites have major
applications as fixing and developing solutions for conventional film and x-ray
processes. The Company has leading market share positions in these products.

Pulp and Paper. The pulp and paper industry utilizes alum and enhanced
coagulants to impart water resistance ('sizing') to paper and to treat the
substantial quantities of water required in the papermaking process. Paper mills
also use sulfuric acid in the sulfur dioxide pulp bleaching process, in pH
adjustments and in water treatment. Other products used to a lesser extent by
the pulp and paper industry include sodium sulfites, which are used for
digesting fibers in the thermo-mechanical pulping process, reducing bleaching
agents such as chlorine and hydrogen peroxide, and as a raw material for other
bleaching agents.

Chemical Processing. The chemical processing market utilizes a number of
the Company's products. Sodium nitrite is primarily used as a reactant in the
manufacture of various organics (i.e. dyes and pigments and rubber processing
chemicals), in applications as a heat transfer salt in high temperature chemical
reactions and as a cooling tower corrosion inhibitor. Potassium fluoride and
fluoborate derivatives are low-volume, higher priced chemicals used in brazing
fluxes, agricultural chemicals, surfactants and analytical reagants. Sulfuric
acid is used in the manufacture of titanium pigments, fertilizer, synthetic
fibers, steel, alum, paper and many other products.

Semiconductor Devices. The Company supplies high-purity semiconductor
acids, caustics and etchants to customers throughout North America, Western
Europe and the Pacific Rim. These customers manufacture silicon wafers and
convert the wafers to integrated circuits. Fluoborate derivatives are also sold
to this market for use in electroplating.

Printing. The Company, through its indirect wholly owned subsidiary
Printing Developments, Inc. ('PDI'), manufactures lithographic plates
predominantly for large lithographers that emphasize high-quality production in
the newspaper insert, commercial, publication and metal decorating markets. PDI
utilizes a unique bimetal plate system that provides higher resolution, better
color reproduction and greater durability than the polymer system used by most
other industry participants. Other products sold to this market include
pressroom chemicals and automatic plate processors.

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MANUFACTURING SEGMENT

The Company manufactures automotive engine parts and fluid handling
equipment for original equipment manufacturers and the automotive services
market through its subsidiaries Toledo Technologies, Inc. ('Toledo
Technologies') and Balcrank Products, Inc. ('Balcrank'). Toledo Technologies
manufactures rocker arms, roller rocker arms, roller followers and other stamped
and machined metal products for the automotive industry. Its three primary
customers are Chrysler, Ford and General Motors. Balcrank principally
manufactures fluid handling equipment such as air driven pumps, hose reels,
control handles and accessories for the automotive services market.

PATENTS, TRADEMARKS AND LICENSES

The Company has certain patents, trademarks and licenses, none of which are
material to the business.

COMPETITION

The Company competes on a variety of factors such as price, freight costs,
service, availability of up-to-date technology, ability to meet specific
customer requests rapidly and quality of the final products. Competitors include
independent chemical manufacturers, integrated companies that supply their own
internal requirements for the Company' s products and manufacturers of
automotive engine parts and fluid handling equipment. Products are sold in
highly competitive markets.

CUSTOMERS; SEASONALITY; BACKLOGS

The Company does not have any single customer, or a small number of
customers, the loss of any one or more of which would have a material adverse
effect on the Company. Sales of calcium chloride are concentrated in late spring
and summer. Sales of soda ash to the glass container industry are somewhat
seasonal because sales of beverage containers are stronger in the summer. Due to
the nature of the Company's business, there are no significant backlogs.

ENVIRONMENTAL MATTERS

Regulation. The Company's various inorganic chemical manufacturing
operations, which have been conducted at a number of facilities for many years,
are subject to numerous laws and regulations relating to the protection of human
health and the environment in the U.S. and Canada. The Company believes that it
is in substantial compliance with such laws and regulations. However, as a
result of its operations, the Company is involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. Based on information available at this time with respect to potential
liability involving these proceedings and inquiries, the Company believes that
any such liability will not have a material adverse effect on its financial
position or results of operations. However, modifications of existing laws and
regulations or the adoption of new laws and regulations in the future,
particularly with respect to environmental and safety standards, or discovery of
any additional or unknown environmental contamination, if any, could require
capital expenditures which might be material or otherwise impact the Company's
operations. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Environmental Matters.'

Accruals/Insurance. The Company's accruals for environmental liabilities
are recorded based on current interpretation of environmental laws and
regulations when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. Accruals for environmental
matters were $16.3 million and $16.2 million at December 31, 1996 and 1997,
respectively. The Company maintains a comprehensive insurance program, including
customary comprehensive general liability insurance for bodily injury and
property damage caused by various activities and occurrences and significant
excess coverage to insure against catastrophic occurrences. However, it does not
maintain any insurance other than as described above for potential liabilities
related specifically to remediation of existing or future environmental
contamination, if any. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Environmental Matters.'

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The Company has an established program to ensure that its facilities comply
with environmental laws and regulations. Expenditures made pursuant to this
program approximated $11.2 million in 1997 (of which approximately $4.4 million
represented capital expenditures and approximately $6.8 million related to
ongoing operations and the management and remediation of hazardous substances).
Expenditures for 1996 approximated $12.0 million (of which approximately $3.9
million represented capital expenditures and approximately $8.1 million related
to ongoing operations and the management and remediation of hazardous
substances). The Company expects similar expenditures in 1998 to be in the range
of $12.0 million to $14.0 million; however, should environmental laws and
regulations affecting the Company's operations become more stringent, the
Company's costs for environmental compliance could increase above such range.

Additionally, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 ('CERCLA'), as amended, and similar state Superfund
statutes have been construed as imposing joint and several liability on present
and former owners and operators of contaminated sites and transporters and
generators of hazardous substances for remediation of contaminated properties
regardless of fault. The Company has received written notice from the
Environmental Protection Agency (the 'EPA') that it has been identified as a
potentially responsible party ('PRP') under CERCLA at three Superfund sites.
With respect to two of these sites, the Company does not believe that its
liability, if any, arising therefrom will be material to its results of
operations or financial condition. With respect to the third site, known as the
Avtex site, which is located in Front Royal, Virginia, the Company has provided
for the estimated costs of certain activities requested by the EPA at the site
in its accrual for environmental liabilities. In addition, Congress continues to
consider the reauthorization of and modifications to CERCLA. Because Congress
has not yet acted with respect to CERCLA, the Company does not have sufficient
information to ascertain the impact any change might have on the Company's
potential liabilities, if any.

Pending Proceedings. At any time, the Company potentially may be involved
in proceedings with various regulatory authorities which could require the
Company to pay fines and penalties relating to violations of environmental laws
and regulations at its sites, or to remediate contamination at some of these
sites, to comply with applicable standards or other requirements, or to incur
capital expenditures to add or change certain pollution control equipment or
processes at its sites. Again, although the amount of any liability that could
arise with respect to these matters cannot be accurately predicted, it is the
opinion of management that the ultimate resolution of these matters will have no
material adverse effect on the Company's operations or financial condition. The
following information addresses those matters of which the Company is presently
aware.

On January 30, 1996 the Ontario Ministry of Natural Resources (the
'Ministry') issued an order to the Company to cease solution mining activities
in certain sections of the Amherstburg plant's brine well fields until the
Company completed a review of, among other things, the stability and
interconnectivity of certain of the brine caverns and submitted certain required
records and data. Under the order, as modified by the Ministry in February 1996,
the Company's production was impacted during the first quarter of 1996.
Subsequent to that time, studies were performed and information generated by a
consultant to the Company which demonstrated the stability of the brine wells in
a manner satisfactory to the Ministry, which, during the third quarter of 1996,
granted permission to the Company to recommence solution mining in the majority
of the brine wells covered by the original order. Additionally, in the third and
fourth quarters of 1996, the Ministry granted new licenses to the Company to
drill and commence development of brine wells on the additional brine field
properties acquired as part of the Company's raw material sourcing program. In
this regard, four new brine wells have been established as part of the initial
development phase of additional brine sources for the plant. Although the
Company's production is no longer impacted by a shortage of brine, the Company
continues to work with consultants experienced in solution mining to expand and
upgrade its solution mining activity relating to the Amherstburg facility.

By letter dated March 22, 1990 from the EPA, the Company received a Notice
of Potential Liability pursuant to Section 107(a) of CERCLA with respect to a
site located in Front Royal, Virginia (the 'Avtex Site'), owned at the time by
Avtex Fibers, Inc., which has since filed for bankruptcy. A sulfuric acid plant
adjacent to the main Avtex Site was previously owned and operated by the Company
(the

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'acid plant'). The letter requested that the Company perform certain activities
at the acid plant including providing site security, preventing discharges,
removing certain specific residue and sludges from two storage vessels and the
transfer line to the main Avtex facility and determining the extent of
contamination at the site, if any. In April 1991, the Company submitted a draft
work plan with respect to the acid plant including each of the activities
requested by the EPA discussed above. The Company has provided for the estimated
costs of $1.6 million for these activities in its accrual for environmental
liabilities. The EPA has not yet responded to this work plan, nor has it
requested that an initial investigation and feasibility study for the acid plant
be performed. As a result, the extent of remediation required, if any, is
unknown. The Company believes that the acid plant is separate and divisible from
the main Avtex Site and, as a result, is not subject to any liability for costs
related thereto. The Company will continue to vigorously assert this position
with the EPA. There has been very limited contact by the EPA with the Company
since 1993, as it appears that the EPA is focused on remediation activities at
the main Avtex site.

EMPLOYEES/LABOR RELATIONS

As of December 31, 1997, the Company had 2,402 employees, 883 of whom were
full-time salaried employees, 1,349 were full-time hourly employees covered
under 25 different union contracts and 170 were hourly employees working in
nonunion facilities.

The Company's 25 union contracts have durations which vary from two to four
years. Since 1986, the Company has been involved in 128 labor negotiations, only
five of which have resulted in work disruptions. During these disruptions,
management has operated the plants and supplied customers without interruption
until the labor disruptions were settled and new contracts were agreed upon. In
this respect, several contracts covering employees including the contract at the
Company's Marcus Hook, Pennsylvania, facility will be up for renewal during
1998.

EXECUTIVE OFFICERS AND KEY EMPLOYEES

Set forth below is information with respect to each of the Company's
executive officers and/or key employees.

* Executive Officers of the Company's General Chemical Corporation
('General Chemical') subsidiary.

Richard R. Russell, 55, President, Chief Executive Officer and Director of
the Company, has held such positions since 1994. Mr. Russell is also the
President and Chief Executive Officer and a Director of General Chemical,
positions he has held since 1986.

Ralph M. Passino, 46, Vice President and Chief Financial Officer of the
Company has held such positions since 1994. Mr. Passino is also Chief Financial
Officer and Vice President of Administration of General Chemical, positions he
has held since 1986, and a Director of General Chemical, a position he has held
since 1994.

* DeLyle W. Bloomquist, 39, Vice President and General
Manager -- Industrial Chemicals of General Chemical since 1996. Between 1995 and
1996, Mr. Bloomquist had been the Director of the Company's Corporate
Distribution Department. Between 1993 and 1995, Mr. Bloomquist served as
Controller -- Industrial Chemicals. Between 1991 and 1993, Mr. Bloomquist had
been the Manager of Services at the Company's Green River Soda Ash operations.

* Michael R. Herman, 35, Vice President and General Counsel of General
Chemical since 1997. Between 1995 and 1997, Mr. Herman had been Deputy General
Counsel. Between 1992 and 1995, Mr. Herman served as Associate General Counsel.

* Bodo B. Klink, 60, Vice President Business Development and Services of
General Chemical since 1996. Mr. Klink was Vice President of Marketing between
1993 and 1996. Mr. Klink had been General Manager -- Water Treatment Chemicals
from 1991 to 1993.

* James N. Tanis, 53, Vice President and General Manager -- Derivative
Products and Services of General Chemical. Mr. Tanis has held this position
since 1987.

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* James A. Wilkinson, 56, Vice President of Manufacturing of General
Chemical. Mr. Wilkinson has held this position since 1986.

ITEM 2. PROPERTIES

In conducting its operations, the Company uses properties having offices,
storage facilities or manufacturing facilities at 98 locations throughout the
United States, Canada and the Philippines. Thirty-four of these properties are
leased while the remainder are owned by the Company. The leased properties are
occupied under rental agreements having terms ranging up to six years and under
month-to-month tenancies. The Company's headquarters is located in Hampton, New
Hampshire.

The locations and uses of certain major properties of the Company are as
follows:

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LOCATION USE
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United States....................... * Pittsburg, California Manufacturing Facility
* Richmond, California Manufacturing Facility
* North Claymont, Delaware Manufacturing Facility,
Offices and Warehouse
Augusta, Georgia Manufacturing Facility
* East St. Louis, Illinois Manufacturing Facility
** Hampton, New Hampshire Offices
Newark, New Jersey Manufacturing Facility
** Parsippany, New Jersey Offices
Solvay, New York Manufacturing Facility
Weaverville, North Carolina Manufacturing Facility,
Offices and Warehouse
Perrysburg,Ohio Manufacturing Facility
and Offices
Toledo, Ohio Manufacturing Facility
* Marcus Hook, Pennsylvania Manufacturing Facility,
Offices and Warehouse
* Anacortes, Washington Manufacturing Facility
Racine, Wisconsin Manufacturing Facility
and Offices
Green River, Wyoming Trona Mine and Manufacturing
Facility
Canada.............................. Amherstburg, Ontario Manufacturing Facility
and Undeveloped Lots
** Mississauga, Ontario Offices
Valleyfield, Quebec Manufacturing Facility
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* Each of the indicated facilities has been mortgaged as security by General
Chemical for the U.S. Revolving Credit Facility and Bank Term Loan.

** Leased.

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The Company's Green River plant has a nameplate capacity of approximately
2.5 million tons of soda ash per year. The plant is owned by GCSAP, a
partnership of which General Chemical is the managing partner and in which
General Chemical has a 51 percent equity interest, The Andover Group, Inc.,
which is a wholly-owned subsidiary of ACI International Limited, has a 25
percent equity interest and TOSOH Wyoming, Inc. which is a wholly-owned
subsidiary of TOSOH America, Inc., has a 24 percent equity interest. Each
partner is prohibited from transferring its interest in GCSAP or withdrawing
from GCSAP without the prior written consent of the other partners.

In addition to such restrictions on the transfer of interests in GCSAP,
there are certain restrictions and obligations with respect to the transfer of
either General Chemical's interest in GCSAP or the voting securities of General
Chemical. For further information, see Note 9 of Notes to the Consolidated
Financial Statements.

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Reserves. The Company mines trona ore under leases with the United States
government, the State of Wyoming, and the Union Pacific Resources Corporation.
The Company's trona reserves and mines are located in the Green River, Wyoming,
area.

The Company's estimated proven reserves within bed No. 17, which the
Company is currently mining, consist of approximately 89 million tons of
extractable ore. At the 1997 operating rate of 2.4 million tons of soda ash per
year (4.1 million tons of trona ore), there is approximately a 22 year supply.
For the three years ended December 31, 1997, annual production of trona ore
averaged approximately 4.2 million tons. In addition, the Company's reserves
contain three other major minable trona beds containing approximately 324
million tons of extractable ore. These beds, which may require significant
capital to access, will provide more than 79 years of added reserves based on
current operating rates.

At the Company's synthetic soda ash plant in Amherstburg, Ontario, Canada,
the Company uses salt and limestone as its raw materials. Based on current
production levels the Company has approximately 29 years of salt reserves.
Limestone reserves owned by the Company total approximately 15 years, with an
option on an additional six years of reserves. However, the Company is not
currently utilizing its limestone reserves and is instead purchasing all of its
limestone requirements under a long-term contract with a major limestone
producer due to the economic benefit of using purchased limestone.

ITEM 3. LEGAL PROCEEDINGS

Richmond Works July 26, 1993 Incident. On July 26, 1993, a pressure relief
device on a railroad tank car containing oleum that was being unloaded at the
Company's Richmond, California, facility, ruptured during the unloading process,
causing the release of a significant amount of sulfur trioxide. Approximately
150 lawsuits seeking substantial amounts of damages were filed against the
Company on behalf of in excess of 60,000 claimants in municipal and superior
courts of California (Contra Costa and San Francisco counties) and in federal
court (United States District Court for the Northern District of California).
All state court cases were coordinated before a coordination trial judge (In Re
GCC Richmond Work Cases, JCCP No. 2906) and the federal court cases were stayed
until completion of the state court cases.

Pursuant to the terms of the settlement agreement, the Company, with funds
to be provided by its insurers pursuant to the terms of the insurance policies
described below, has agreed to make available a maximum of $180 million to
implement the settlement. Various 'funds' and 'pools' are established by the
settlement agreement to compensate claimants in different subclasses who meet
certain requirements. Of this amount, $24 million has been allocated for
punitive damages, notwithstanding the Company's strong belief that punitive
damages are not warranted. The settlement also makes available $23 million of
this $180 million for the payment of legal fees and litigation costs to class
counsel and the plaintiffs' management committee.

The settlement agreement provides, among other things, that while claimants
may 'opt out' of the compensatory damages portion of the settlement and pursue
their own cases separate and apart from the class settlement mechanism, they
have no right to opt out of the punitive damages portion of the settlement.
Consequently, under the terms of the settlement, no party may seek punitive
damages from the Company outside of those provided by the settlement.
Approximately 2,800 claimants, which constitutes less than 5 percent of the
total number of claimants, originally elected to so opt out. Except with respect
to compensatory damage claims by claimants electing to opt-out, the settlement
fully releases from all claims arising out of the July 26, 1993 incident the
Company and all of its related entities, shareholders, directors, officers and
employees, and all other entities who have been or could

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have been sued as a result of the July 26th incident, including all those who
have sought or could seek indemnity from the Company.

Notices of appeal of all or portions of the settlement approved by the
court have been filed by five law firms representing approximately 2,750 of the
opt-outs, with 2,700 of these claimants represented by the same law firm.
Virtually all of these claimants have not specified the amount of their claims
in court documents, although the Company believes that their alleged injuries
are no different in nature or extent than those alleged by the settling
claimants. On May 8, 1996, the California Court of Appeals dismissed each of the
appeals that had been filed challenging the trial court's approval of the class
action settlement. The Court of Appeals dismissed the appeal relating to the
trial court's rulings on plaintiffs' attorneys' fees on the ground that the
appealing attorneys lacked standing to appeal. The Court of Appeals also
dismissed each of the other grounds for appeal, ruling that the trial court's
orders and rulings approving the settlement were not presently appealable, if at
all, by the appealing claimants since they had all elected to opt out of the
settlement. The appealing attorneys and some of the appealing claimants filed a
petition for review with the California Supreme Court which, on August 15, 1996,
elected not to review the Court of Appeals' decision.

On March 11, 1997, the coordination judge dismissed the material claims of
1,269 of the approximately 2,750 opt-out claimants, primarily on the grounds
that they had failed to comply with previous pre-trial orders. On April 8, 1997,
the California Court of Appeals denied a petition for review of the dismissals
filed by attorneys for the dismissed opt-out claimants, and on June 8, 1997, the
California Supreme Court denied the same attorneys' petition for review of the
California Court of Appeals' denial of their prior petition. On February 5,
1998, a hearing was held before the coordination judge on the Company's motion
to dismiss the material claims of another 800 of the approximately 2,750
original opt-out claimants, again primarily on the grounds that they failed to
comply with previous pre-trial orders. As of March 5, 1998, the Company is
awaiting the decision of the coordination judge on this motion.

The settlement includes various terms and conditions designed to protect
the Company in the event that the settlement as approved by the court is
overturned or modified on appeal. If such an overturn or modification occurs,
the Company has the right to terminate the settlement and make no further
settlement payments, and any then unexpended portions of the settlement proceeds
(including, without limitation, the $24 million punitive damage fund) would be
available to address any expenses and liabilities that might arise from any such
an overturn or modification. In addition, in the event that the settlement as
approved by the court is overturned or modified on appeal, the release document
signed by settling claimants contains language which fully releases the Company
from any further claims, either for compensatory or punitive damages, arising
out of the July 26, 1993 incident. The Company has presently obtained releases
from over 95 percent of the settling claimants and believes that it will have
obtained the majority of releases from the remaining settling claimants prior to
any such appeal being ruled on by an appellate court.

It is possible that one or more of the opt-out claimants, once their
opt-out cases are finally litigated through trial, may attempt to refile all or
a portion of the appeals that were dismissed by the California Court of Appeals.
While there can be no assurances regarding how an appellate court might rule in
the event of a refiling of an appeal of the settlement, the Company believes
that the settlement will be upheld on appeal. In the event of a reversal or
modification of the settlement on appeal, with respect to lawsuits by any then
remaining claimants (opt-outs and settling claimants who have not signed
releases) the Company believes that, whether or not it elects to terminate the
settlement in the event it is overturned or modified on appeal, it will have
adequate resources from its available insurance coverage to vigorously defend
these lawsuits through their ultimate conclusion, whether by trial or
settlement. However, in the event the settlement is overturned or modified on
appeal, there can be no assurance that the Company's ultimate liability
resulting from the July 26, 1993 incident would not exceed the available
insurance coverage by an amount which could be material to its financial
condition or results of operations, nor is the Company able to estimate or
predict a range of what such ultimate liability might be, if any.

<PAGE>

<PAGE>
incident, and the Company also has excess insurance policies of $175 million
over the first two layers. The Company reached an agreement with the carrier for
the first two layers whereby the carrier paid the Company $16 million in
settlement of all claims the Company had against that carrier. In the third
quarter of 1994, the Company recorded a $9 million charge to earnings for costs
which the Company incurred related to this matter. The Company's excess
insurance policies, which are written by two Bermuda-based insurers, provide
coverage for compensatory as well as punitive damages. Both insurers have
executed agreements with the Company confirming their respective commitments to
fund the settlement as required by their insurance policies with the Company and
as described in the settlement agreement. In addition, these same insurers
currently continue to provide substantially the same insurance coverage to the
Company.

Milwaukee Litigation. In March 1993, an outbreak of cryptosporidia occurred
in the public water supply of the City of Milwaukee. As a result of that
incident, several lawsuits have been filed with the Milwaukee County Circuit
Court against one or more of the City of Milwaukee, its Department of Public
Works, Sara Lee Corporation, E.D. Wesley Co., Peck Foods Corporation, certain
hotels, numerous insurance companies, several municipalities and the Company.
The complaints generally allege, among other things, that the outbreak was
caused when certain defendants other than the Company illegally disposed of
waste into the water supply, and that the City of Milwaukee failed to properly
operate its water treatment plant in a manner that would have prevented the
outbreak. The principal allegations against the Company are that a water
treatment chemical sold to the City of Milwaukee by the Company should have
removed the bacteria and failed to do so and that the Company consulted with the
City concerning the water purification.

One of the suits (Markwiese, et al v. Peck Foods Corporation, et al filed
in 1993) had been certified, prior to the service of a complaint against the
Company, as a class action in favor of all persons who sustained damage as a
result of the wrongful acts of the various defendants. Subsequently, the Company
and the City of Milwaukee challenged, among other things, the class
certification, and the Wisconsin Court of Appeals remanded this matter to the
trial court for a determination of how certain issues impact whether class
certification was appropriate. On March 13, 1998, a hearing was held before a
new trial judge on the issue of whether class certification is appropriate in
this matter, and the judge ruled from the bench that this matter shall not
proceed as a class action. It is unknown at this time whether lawyers for the
plaintiffs will appeal this ruling.

In addition to the Markwiese action, several other lawsuits have since been
filed by the same lead attorneys in the Circuit Court of Milwaukee County
against the same basic group of defendants, including two multi-party actions,
Quandt et al v. Northbrook Property and Casualty Insurance Co. filed in 1994 and
Winiarski et al v. Peck Foods et al filed in 1996, on behalf of a total of 98
plaintiffs. The unspecified damages sought by these various complaints is
alleged to be 'far in excess of $1.0 million dollars' for personal injury,
economic loss, emotional distress, pain and suffering, medical expenses and
punitive damages.

The Company has denied all material allegations of the complaints and will
continue to defend these lawsuits vigorously. The Company further believes that
its available insurance provides adequate coverage in the event of an adverse
result in this matter, and that this matter will not have a material adverse
effect on its financial condition or results of operations.

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

No items were submitted to a vote of security holders of the Company,
through the solicitation of proxies or otherwise, during the fourth quarter of
fiscal 1997.

<PAGE>

<PAGE>
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

The Company's Common Stock is traded on the New York Stock Exchange (the
'NYSE') under the symbol 'GCG.' The following table shows the high and low
recorded sales prices of the Company's Common Stock, as reported by the NYSE for
each of the quarterly periods listed:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 HIGH LOW
- ------------------------------------------------------------------------------------- ------ ------

<S> <C> <C>
Second Quarter....................................................................... $20.75 $17.50
Third Quarter........................................................................ 20.63 16.75
Fourth Quarter....................................................................... 23.63 18.50
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
- -------------------------------------------------------------------------------------

<S> <C> <C>
First Quarter........................................................................ $24.00 $20.25
Second Quarter....................................................................... 26.75 21.88
Third Quarter........................................................................ 33.38 23.00
Fourth Quarter....................................................................... 33.06 25.00
</TABLE>

As of March 1, 1998, there were 145 stockholders of record of the Company's
Common Stock and 3 stockholders of record of the Company's Class B Common Stock.

DIVIDENDS

The Company expects to continue its policy of paying regular quarterly cash
dividends of $.05 per share. Although management believes that such a dividend
is appropriate, the declaration of dividends is dependent upon the Company's
earnings, financial position and other relevant business conditions. The current
dividend policy will be reviewed by the Company's Board of Directors from time
to time. No dividend will be payable unless permitted by applicable law,
declared by the Board of Directors and adequate funds are available therefor.
During 1997, cash dividends of $.20 per share were paid. For further
information, see the information contained under the caption 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.'

<PAGE>

<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data of the Company has been
derived from and should be read in conjunction with the Company's Consolidated
Financial Statements.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Net revenues............................................. $ 518,718 $ 525,912 $ 550,871 $ 623,659 $ 652,977
Cost of sales............................................ 363,268 361,637 387,255 422,633 451,442
Gross profit............................................. 155,450 164,275 163,616 201,026 201,535
Selling, general and administrative expense.............. 58,330 57,034 56,619 71,810(7) 64,443
Richmond incident costs.................................. -- 9,000 -- -- --
Operating profit......................................... 97,120 98,241 106,997 129,216(7) 137,092
Minority interest........................................ 17,733 16,957 19,458 31,635 24,253
Interest income.......................................... 3,019 2,487 2,937 2,433 2,504
Foreign currency transaction (gains) losses.............. 1,719 4,004 (1,382) (169) 627
Other (income) expense................................... (651) 63 735 704 454
Income before interest, income taxes and extraordinary
item................................................... 81,338 79,704 91,123 99,479(7) 114,262
Interest expense......................................... 37,917 33,006 26,704 23,748 21,602
Income before income taxes and extraordinary item........ 43,421 46,698 64,419 75,731(7) 92,660
Income tax provision..................................... 16,185 18,393 43,326(1) 29,123 36,345
Income before extraordinary item......................... 27,236 28,305 21,093(1) 46,608(7) 56,315
Net income(2)............................................ $ 25,151 $ 20,102 $ 21,093(1) $ 46,608(7) $ 56,315
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
PER SHARE:(3)
Income before extraordinary item -- basic................ $ 1.38 $ 1.43 $ 1.07(1) $ 2.19(7) $ 2.63
Income before extraordinary item -- diluted.............. 1.38 1.43 1.07(1) 2.13(7) 2.50
Net income -- basic...................................... 1.27 1.02 1.07(1) 2.19(7) 2.63
Net income -- diluted.................................... 1.27 1.02 1.07(1) 2.13(7) 2.50
Dividends................................................ .49 .70 1.00 .13 .20
Weighted average number of shares outstanding -- basic... 19,736,842 19,736,842 19,736,842 21,317,657 21,424,401
Weighted average number of shares outstanding --
diluted................................................ 19,736,842 19,736,842 19,736,842 21,898,548 22,502,642

OTHER DATA:
Capital expenditures..................................... $ 20,221 $ 28,503 $ 34,093 $ 54,165 $ 56,671
Depreciation and amortization(4)......................... 25,826 25,062 27,095 28,619 32,454

BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and short-term investments........ $ 43,818 $ 28,701 $ 19,025 $ 51,700 $ 21,753
Adjusted working capital(5).............................. (6,252) 4,471 12,484 23,847 46,027
Total assets............................................. 425,944 433,627 431,325 485,137 561,637
Long-term debt(6)........................................ 306,200 304,750 291,495 234,609 258,004
Total equity (deficit)................................... (223,051) (216,831) (215,336) (119,753) (94,239)
</TABLE>

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

All prior period per share figures have been restated in accordance with SFAS
No. 128

(1) The Company recorded a nonrecurring charge to income tax expense of $17.1
million ($.87 per share) for all years prior to 1995 related to Internal
Revenue Service (the 'IRS') examinations. See Note 6 of Notes to the
Consolidated Financial Statements.

(2) During 1993 and 1994 the Company recorded extraordinary losses of $2.1
million and $8.2 million, respectively, related to the early retirement of
certain outstanding indebtedness.

(3) Adjusted for all periods presented to reflect a 202,994.4539 per share stock
dividend effected as of October 17, 1994.

(4) Consolidated depreciation and amortization excluding amortization of
deferred financing costs.

(5) Adjusted working capital consists of total current assets (excluding cash
and short-term investments) less total current liabilities (excluding the
current portion of long-term debt).

(6) Includes the current portion of long-term debt.

(7) Includes a one-time charge of $12.5 million ($7.6 million after tax or $.34
per share) due primarily to awards made under the Restricted Unit Plan,
reflecting the portion earned under prior equity programs.

<PAGE>

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

OVERVIEW

The General Chemical Group Inc., which has a history dating back to 1899,
is a diversified manufacturing company predominantly engaged in the production
of inorganic chemicals, with manufacturing facilities located in the United
States and Canada. Through its Chemical Segment, the Company is a leading
producer of soda ash in North America, and a major North American supplier of
calcium chloride, sodium and ammonia salts, sulfites, nitrites, aluminum-based
chemical products, printing plates and refinery and chemical regeneration
services to a broad range of industrial and municipal customers. Through its
Manufacturing Segment, the Company manufactures precision and highly engineered
stamped and machined metal products, principally automotive engine parts. Within
the Chemical Segment, the Company's wholly owned subsidiary, General Chemical
Corporation ('GCC'), acquired all of the outstanding stock of Peridot Holdings,
Inc. ('Peridot'), a leading manufacturer and supplier of sulfuric acid and water
treatment chemicals. The acquisition, which occurred on July 1, 1997, was
accounted for under the purchase method. The net assets and results of
operations have been included in the consolidated financial statements since the
date of acquisition. See Note 5 of Notes to the Consolidated Financial
Statements.

This discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the respective notes thereto included in
Item 8. This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in such statements as a result of the following
risk factors: risks and uncertainties in connection with business conditions in
the markets the Company serves and in the general economy, and the impact of
competitive products and pricing, in particular, the price of soda ash.

RESULTS OF OPERATIONS

The following table sets forth certain income statement data for each of
the three years in the period ended December 31, 1997 (dollars in millions).

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997
--------------- --------------- --------------

<S> <C> <C> <C> <C> <C> <C>
Net revenues.............................................. $550.9 100 % $623.7 100 % $653.0 100 %
Cost of sales............................................. 387.3 70 422.6 68 451.4 69
------ ---- ------ ---- ------ ----
Gross profit.............................................. 163.6 30 201.1 32 201.6 31
Selling, general and administrative expense............... 56.6 10 71.8(2) 12 64.4 10
------ ---- ------ ---- ------ ----
Operating profit.......................................... 107.0 19 129.2 20 137.1 21
Interest expense.......................................... 26.7 5 23.7 4 21.6 3
Interest income........................................... 2.9 1 2.4 -- 2.5 --
Foreign currency transaction (gains)/losses............... (1.4) -- (.2) -- .6 --
Other expense, net........................................ .7 -- .8 -- .4 --
Minority interest......................................... 19.5 4 31.6 5 24.3 4
------ ---- ------ ---- ------ ----
Income before income taxes................................ 64.4 12 75.7 12 92.7 14
Income tax provision...................................... 43.3(1) 8 29.1 5 36.4 6
------ ---- ------ ---- ------ ----
Net Income................................................ $ 21.1 4 % $ 46.6 7 % $ 56.3 9 %
------ ---- ------ ---- ------ ----
------ ---- ------ ---- ------ ----
</TABLE>

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

Note: May not add due to rounding.

(1) Includes nonrecurring charge to income tax expense of $17.1 million for all
years prior to 1995 related to IRS examinations. See Note 6 of Notes to the
Consolidated Financial Statements.

(2) Includes a one-time charge of $12.5 million ($7.6 million after-tax or $.34
per share) due primarily to awards made under the Restricted Unit Plan,
reflecting the portion earned under prior equity programs.

<PAGE>

<PAGE>
1997 COMPARED WITH 1996

Net revenues were $653.0 million for 1997 compared with $623.7 million for
1996, or an increase of 5 percent. Higher Chemical Segment sales were due
primarily to sales of Peridot, which was acquired on July 1, 1997, and volume
gains in most other product lines, offset by lower pricing of soda ash and
calcium chloride. Higher Manufacturing Segment sales were the result of
increased volume and product mix improvements toward higher-value-added
automotive engine components.

Gross profit of $201.6 million for 1997 was comparable to the prior year
level. Gross profit as a percentage of sales decreased to 31 percent for 1997
versus 32 percent for 1996. This decrease was primarily due to lower pricing of
soda ash and calcium chloride, partially offset by higher volumes in the
Manufacturing Segment and in the majority of the product lines in the Chemical
Segment.

Selling, general and administrative expense as a percentage of net revenues
decreased from 12 percent to 10 percent for 1997. This decrease is due to the
recording in 1996 of a one-time charge of $12.5 million related primarily to a
new restricted unit plan created by the Company which replaced certain prior
equity programs.

The $2.1 million decrease in interest expense for 1997 compared with 1996
was primarily due to lower outstanding debt balances for the first six months of
1997.

Interest income for 1997 was $2.5 million, which approximated prior-year
levels.

The foreign currency transaction loss for 1997 was $0.6 million compared
with a $0.2 million gain in 1996, due to the impact of exchange rate
fluctuations on the Company's Canadian subsidiary.

Other expense for 1997 of $0.4 million was essentially at the prior-year
level.

Minority interest for 1997 was $24.3 million compared with $31.6 million
for 1996, reflecting lower earnings due to lower soda ash pricing of General
Chemical (Soda Ash) Partners ('GCSAP').

Net income for 1997 was $56.3 million versus $46.6 million for 1996,
reflecting the foregoing.

1996 COMPARED WITH 1995

Net revenues were $623.7 million for 1996 compared with $550.9 million for
1995, or an increase of 13 percent. Higher Chemical Segment sales were the
result of favorable soda ash pricing and improved volume across all product
lines. Higher Manufacturing Segment sales were the result of volume and product
mix improvements toward higher-value automotive engine parts.

Gross profit increased 23 percent to $201.1 million for 1996 compared with
$163.6 million for 1995. Gross profit as a percentage of sales increased to 32
percent for 1996 versus 30 percent for 1995. Favorable soda ash pricing and
higher volume, offset in part by higher manufacturing expenses, account for the
above-mentioned increase.

Selling, general and administrative expense as a percentage of net revenues
increased from 10 percent to 12 percent for 1996. This increase is due to the
recording of a one-time charge of $12.5 million related primarily to a new
restricted unit plan created by the Company which replaced certain prior equity
programs.

The $3.0 million decrease in interest expense for 1996 compared with 1995
was primarily due to lower outstanding debt balances.

Interest income for 1996 was $2.4 million, which approximated prior-year
levels.

The foreign currency transaction gain for 1996 was $0.2 million compared
with a $1.4 million gain in 1995, principally due to the impact of exchange rate
fluctuations on a $52 million U.S.-denominated loan of the Company's Canadian
subsidiary. The impact of these foreign currency transaction gains on this loan
was noncash.

Other expense for 1996 of $0.8 million was essentially at the prior-year
level.

Minority interest for 1996 was $31.6 million compared with $19.5 million
for 1995, reflecting higher earnings due to favorable soda ash pricing of GCSAP.

<PAGE>

<PAGE>
Net income for 1996 was $46.6 million versus $21.1 million for 1995,
reflecting the foregoing, and the nonrecurring charge to income tax expense
recorded in 1995.

OTHER MATTERS

In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, 'Earnings per Share' ('FAS 128'), which
the Company adopted for both interim and annual reports ending after December
15, 1997. FAS 128 requires the Company to present Basic Earnings Per Share,
which exclude dilution and Diluted Earnings Per Share which include potential
dilution.

In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, 'Reporting Comprehensive Income' ('FAS
130') and Statement of Financial Accounting Standards No. 131, 'Disclosures
about Segments of an Enterprise and Related Information' ('FAS 131'). The
Company is required to adopt FAS 130 and FAS 131 for fiscal years beginning
after December 15, 1997. The Company is currently evaluating the impact of FAS
131 on its segments.

The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium ('Year 2000') approaches. The
Company is utilizing both internal and external resources to replace or
reprogram existing systems to make them Year 2000 compliant. The Company
believes that the cost of Year 2000 compliance will not have a material effect
on the Company's results of operations or financial condition and cash flows.
The Company cannot anticipate the impact of customers', suppliers' and vendors'
non-compliance with the Year 2000.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $21.8 million at December 31, 1997 compared
with $51.7 million at December 31, 1996. During 1997 the Company generated cash
flow from operating activities of $86.7 million, used cash of $56.7 million for
capital expenditures, $27.2 million for the acquisition of treasury stock, $30.1
million for the acquisition of a business and $5.4 million for the payment of
dividends.

The Company had working capital of $50.4 million at December 31, 1997
compared with $58.2 million at December 31, 1996. The decrease in working
capital reflects higher accounts payable coupled with lower cash balances,
offset by higher accounts receivable and inventory balances.

General Chemical has a revolving credit facility which expires on March 31,
1999 and allows for borrowings up to $130 million, including letters of credit
of up to $30 million.

GC Canada has a revolving credit facility of $15 million (Canadian)
(approximately $11 million U.S.), which expires on June 22, 2000. This revolving
credit facility bears interest at a rate equal to a spread over a reference rate
chosen by GC Canada from various options.

While certain of the Company's subsidiaries' debt facilities are
outstanding, the Company's subsidiaries must meet specific financial tests on an
ongoing basis, which are customary for these types of facilities. Except as
provided by applicable corporate law, there are no restrictions on the Company's
ability to pay dividends from retained earnings. However, the payment of cash
dividends by GCC to the Company is subject to certain restrictions under the
terms of various agreements covering GCC's long-term debt. Assuming certain
financial covenants are met, GCC is permitted to pay cash dividends of up to 50
percent of the net income (subject to certain adjustments) of GCC for the
applicable period. Consequently, the Company's ability to pay cash dividends on
Common Stock may effectively be limited by such agreements. At December 31,
1997, approximately $62.2 million was available for dividend payments in
accordance with these covenants.

On February 6, 1998, the Company's wholly owned subsidiary Toledo
Technologies, Inc., acquired all of the outstanding stock of Sandco Automotive
Ltd. ('Sandco') a manufacturer of engine parts for the North American automobile
industry and its aftermarket. Sandco is based in Waterdown, Ontario. Funding for
this transaction was provided with new borrowings. This acquisition will be
accounted for using the purchase method.

On February 13, 1998, the Company's wholly owned subsidiary, General
Chemical Corporation, entered into an agreement to acquire, subject to certain
conditions precedent to closing, all of the

<PAGE>

<PAGE>
outstanding stock of Reheis Inc. ('Reheis'). Reheis is headquartered in New
Jersey and is the world's leading producer and supplier of the active chemical
ingredients in antiperspirants and over-the-counter antacids as well as a
supplier of pharmaceutical intermediates and other products. Funding for this
transaction will be provided by existing cash and borrowings on GCC's revolving
credit facility. GCC will account for this transaction using the purchase
method.

The Company anticipates that the capital spending level for 1998 will
approximate the prior-year level. Management believes that the Company's cash
flows will be sufficient to cover its future interest expense, capital
expenditures and working capital requirements. Other than the Reheis
acquisition, the Company is not party to any agreement or arrangement with
respect to any future acquisition. In the event the Company identifies
additional acquisition candidates, however, the Company's current sources of
liquidity may not be adequate. Accordingly, the Company may issue additional
equity or debt securities, subject to market and other conditions.

Richmond Works July 26, 1993 Incident. On July 26, 1993, a pressure relief
device on a railroad tank car containing oleum that was being unloaded at the
Company's Richmond, California, facility, ruptured during the unloading process,
causing the release of a significant amount of sulfur trioxide. Approximately
150 lawsuits seeking substantial amounts of damages were filed against the
Company on behalf of in excess of 60,000 claimants in municipal and superior
courts of California (Contra Costa and San Francisco counties) and in federal
court (United States District Court for the Northern District of California).
All state court cases were coordinated before a coordination trial judge (In Re
GCC Richmond Works Cases, JCCP No. 2906) and the federal court cases were stayed
until completion of the state court cases.

After several months of negotiation under the supervision of a settlement
master, the Company and a court-approved plaintiffs' management committee
executed a comprehensive settlement agreement which resolved the claims of
approximately 95 percent of the claimants who filed lawsuits arising out of the
July 26th incident, including the federal court cases. After a final settlement
approval hearing on October 27, 1995, the coordination trial judge approved the
settlement on November 22, 1995. Pursuant to the terms of the settlement
agreement, the Company, with funds to be provided by its insurers pursuant to
the terms of the insurance policies described below, has agreed to make
available a maximum of $180 million to implement the settlement. In addition,
the settlement agreement provides, among other things, that while claimants may
'opt out' of the compensatory damages portion of the settlement and pursue their
own cases separate and apart from the class settlement mechanism, they have no
right to opt out of the punitive damages portion of the settlement.
Consequently, under the terms of the settlement, no party may seek punitive
damages from the Company outside of those provided by the settlement. See
'Business -- Legal Matters.'

<PAGE>

<PAGE>
the Company believes that, whether or not it elects to terminate the settlement
in the event it is overturned or modified on appeal, it will have adequate
resources from its available insurance coverage to vigorously defend these
lawsuits through their ultimate conclusion, whether by trial or settlement.
However, in the event the settlement is overturned or modified on appeal, there
can be no assurance that the Company's ultimate liability resulting from the
July 26, 1993 incident would not exceed the available insurance coverage by an
amount which could be material to its financial condition or results of
operations, nor is the Company able to estimate or predict a range of what such
ultimate liability might be, if any.

The Company has insurance coverage relating to this incident which totals
$200 million. The first two layers of coverage total $25 million with a sublimit
of $12 million applicable to the July 26, 1993 incident, and the Company also
has excess insurance policies of $175 million over the first two layers. The
Company reached an agreement with the carrier for the first two layers whereby
the carrier paid the Company $16 million in settlement of all claims the Company
had against that carrier. In the third quarter of 1994, the Company recorded a
$9 million charge to earnings for costs which the Company incurred related to
this matter. The Company's excess insurance policies, which are written by two
Bermuda-based insurers, provide coverage for compensatory as well as punitive
damages. Both insurers have executed agreements with the Company confirming
their respective commitments to fund the settlement as required by their
insurance policies with the Company and as described in the settlement
agreement. In addition, these same insurers currently continue to provide
substantially the same insurance coverage to the Company.

ENVIRONMENTAL MATTERS

The Company has an established program to ensure that its facilities comply
with environmental laws and regulations. Expenditures made pursuant to this
program approximated $11.2 million in 1997 (of which approximately $4.4 million
represented capital expenditures and approximately $6.8 million related to
ongoing operations and the management and remediation of hazardous substances).
Expenditures for 1996 approximated $12.0 million (of which approximately $3.9
million represented capital expenditures and approximately $8.1 million related
to ongoing operations and the management and remediation of hazardous
substances). The Company expects similar expenditures in 1998 to be in the range
of $12.0 million to $14.0 million; however, should environmental laws and
regulations affecting the Company's operations become more stringent, the
Company's costs for environmental compliance could increase above such range.

Additionally, CERCLA, as amended, and similar state Superfund statutes have
been construed as imposing joint and several liability on present and former
owners and operators of contaminated sites and transporters and generators of
hazardous substances for remediation of contaminated properties regardless of
fault. The Company has received written notice from the EPA that it has been
identified under CERCLA as a PRP at three Superfund sites. With respect to two
of these sites, the Company does not believe that its liability, if any, arising
therefrom will be material to its results of operations or financial condition.
With respect to the third site, known as the Avtex site, which is located in
Front Royal, Virginia, the Company has provided for the estimated costs of
certain activities requested by the EPA at the site in its accrual for
environmental liabilities. See 'Business -- Environmental Matters -- Pending
Proceedings.' In addition, Congress continues to consider the reauthorization of
and modifications to CERCLA. Because Congress has not yet acted with respect to
CERCLA, the Company does not have sufficient information to ascertain the impact
any change might have on the Company's potential liabilities, if any.

INFLATION

Inflation has had a minimal effect on the results of the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See 'Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.'

<PAGE>

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
THE GENERAL CHEMICAL GROUP INC.:

We have audited the accompanying consolidated balance sheets of The General
Chemical Group Inc. and subsidiaries as of December 31, 1996 and 1997, and the
related consolidated statements of operations, changes in equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1997.
Our audits also included the financial statement schedule 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 the financial statement schedule based
on our audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The General Chemical Group Inc.
and subsidiaries at December 31, 1996 and 1997, 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 whole, presents
fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 13, 1998

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)

<S> <C> <C> <C>
Net revenues................................................................. $550,871 $623,659 $652,977
Cost of sales................................................................ 387,255 422,633 451,442
Selling, general and administrative expense.................................. 56,619 71,810 64,443
-------- -------- --------
Operating profit............................................................. 106,997 129,216 137,092
Interest expense............................................................. 26,704 23,748 21,602
Interest income.............................................................. 2,937 2,433 2,504
Foreign currency transaction (gains) losses.................................. (1,382) (169) 627
Other expense, net........................................................... 735 704 454
-------- -------- --------
Income before minority interest and income taxes............................. 83,877 107,366 116,913
Minority interest............................................................ 19,458 31,635 24,253
-------- -------- --------
Income before income taxes................................................... 64,419 75,731 92,660
Income tax provision......................................................... 43,326 29,123 36,345
-------- -------- --------
Net income.............................................................. $ 21,093 $ 46,608 $ 56,315
-------- -------- --------
-------- -------- --------
Earnings per common share:
Basic................................................................... $ 1.07 $ 2.19 $ 2.63
-------- -------- --------
-------- -------- --------
Diluted................................................................. $ 1.07 $ 2.13 $ 2.50
-------- -------- --------
-------- -------- --------
</TABLE>

See the accompanying notes to the consolidated financial statements.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
--------- ---------
(IN THOUSANDS, EXCEPT
SHARE DATA)

<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 51,700 $ 21,753
Receivables, net................................................................. 102,478 122,720
Inventories...................................................................... 41,429 45,958
Deferred income taxes............................................................ 11,264 14,145
Other current assets............................................................. 2,153 2,370
--------- ---------
Total current assets........................................................ 209,024 206,946
Property, plant and equipment, net.................................................... 239,819 304,189
Other assets.......................................................................... 36,294 50,502
--------- ---------
Total assets................................................................ $ 485,137 $ 561,637
--------- ---------
--------- ---------

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
Accounts payable................................................................. $ 53,772 $ 61,332
Accrued liabilities.............................................................. 74,205 73,258
Income taxes payable............................................................. 5,500 4,576
Current portion of long-term debt................................................ 17,392 17,392
--------- ---------
Total current liabilities................................................... 150,869 156,558
Long-term debt........................................................................ 217,217 240,612
Other liabilities..................................................................... 198,232 215,405
--------- ---------
Total liabilities........................................................... 566,318 612,575
--------- ---------
Minority interest..................................................................... 38,572 43,301
--------- ---------
Equity (deficit):
Preferred Stock, $.01 par value; authorized 10,000,000 shares; none issued or
outstanding..................................................................... -- --
Common Stock, $.01 par value; authorized 100,000,000 shares; issued: 8,009,601
and 12,558,697 shares at December 31, 1996 and December 31, 1997,
respectively.................................................................... 80 126
Class B Common Stock, $.01 par value; authorized 40,000,000 shares; issued and
outstanding: 14,261,467 shares and 9,758,421 at December 31, 1996 and December
31, 1997, respectively.......................................................... 143 97
Capital deficit.................................................................. (185,215) (183,814)
Foreign currency translation adjustments......................................... (1,435) (2,197)
Retained earnings................................................................ 66,797 118,855
Treasury stock, at cost: 6,325 and 1,362,898 shares at December 31, 1996 and
December 31, 1997, respectively................................................. (123) (27,306)
--------- ---------
Total equity (deficit)...................................................... (119,753) (94,239)
--------- ---------
Total liabilities and equity (deficit)...................................... $ 485,137 $ 561,637
--------- ---------
--------- ---------
</TABLE>

See the accompanying notes to the consolidated financial statements.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------
(IN THOUSANDS)

<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................................... $ 21,093 $ 46,608 $ 56,315
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 28,258 29,745 33,094
Net loss on disposition of long-term assets......................... 950 1,170 1,127
Unrealized exchange (gain) loss..................................... (1,586) 31 1,405
Restricted unit plan costs.......................................... -- 11,319 1,302
(Increase) in receivables........................................... (2,631) (12,126) (16,920)
(Increase) decrease in inventories.................................. (5,406) 525 (2,537)
Increase in accounts payable........................................ 315 2,814 5,575
Increase (decrease) in accrued liabilities.......................... 4,379 (9,970) (6,890)
Increase (decrease) in income taxes payable......................... (2,866) 1,279 (954)
Increase in other liabilities and assets, net....................... 13,279 9,125 10,468
Increase in minority interest....................................... 686 10,294 4,729
-------- -------- --------
Net cash provided by operating activities......................... 56,471 90,814 86,714
-------- -------- --------
Cash flows from investing activities:
Capital expenditures..................................................... (34,093) (54,165) (56,671)
Proceeds from sales or disposals of long-term assets..................... 577 73 70
Payments from related parties............................................ -- 14,000 --
Acquisition of business, net of cash acquired (Note 5)*.................. -- -- (30,130)
-------- -------- --------
Net cash used for investing activities............................ (33,516) (40,092) (86,731)
-------- -------- --------
Cash flows from financing activities:
Net proceeds from initial public offering................................ -- 40,600 --
Proceeds from long-term debt............................................. 6,200 20,000 49,000
Repayment of long-term debt.............................................. (19,455) (76,886) (45,536)
Payments to acquire treasury stock....................................... -- (123) (27,183)
Dividends................................................................ (19,650) (1,668) (5,368)
-------- -------- --------
Net cash used for financing activities............................ (32,905) (18,077) (29,087)
-------- -------- --------
Effect of exchange rate changes on cash....................................... 274 30 (843)
-------- -------- --------
Increase (decrease) in cash and cash equivalents.............................. (9,676) 32,675 (29,947)
Cash and cash equivalents at beginning of period.............................. 28,701 19,025 51,700
-------- -------- --------
Cash and cash equivalents at end of period.................................... $ 19,025 $ 51,700 $ 21,753
-------- -------- --------
-------- -------- --------
Supplemental information:
Cash paid for income taxes............................................... $ 23,827 $ 23,051 $ 35,179
-------- -------- --------
-------- -------- --------
Cash paid for interest................................................... $ 25,543 $ 22,809 $ 20,923
-------- -------- --------
-------- -------- --------
* Purchase of business, net of cash acquired:
Working Capital, other than cash......................................... $ 3,110
Plant, property and equipment............................................ (43,007)
Other assets............................................................. (19,593)
Noncurrent liabilities................................................... 29,360
--------
Net cash used to acquire business................................. $(30,130)
--------
--------
</TABLE>

See the accompanying notes to the consolidated financial statements.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
CLASS FOREIGN
B CURRENCY
COMMON COMMON TREASURY CAPITAL TRANSLATION RETAINED
STOCK STOCK STOCK DEFICIT ADJUSTMENTS EARNINGS TOTAL
------ ------ -------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994...................... $ 197 $-- $ -- $(237,140) $(1,414) $ 21,526 $(216,831)
Net income................................... 21,093 21,093
Dividends (Per Share $1.00).................. (19,650) (19,650)
Foreign currency translation................. 52 52
------ ------ -------- --------- ----------- --------- ---------
Balance at December 31, 1995...................... 197 -- -- (237,140) (1,362) 22,969 (215,336)
Net income................................... 46,608 46,608
Dividends (Per Share $.125).................. (2,780) (2,780)
Proceeds from initial public offering........ 25 40,575 40,600
Conversion of Common Stock to
Class B Common Stock....................... (197 ) 197 --
Conversion of Class B Common Stock to Common
Stock...................................... 54 (54) --
Restricted Unit Plan grants, cancellations,
tax benefits and other..................... 1 11,350 11,351
Purchase of Treasury stock................... (123) (123)
Foreign currency translation................. (73) (73)
------ ------ -------- --------- ----------- --------- ---------
Balance at December 31, 1996...................... 80 143 (123) (185,215) (1,435) 66,797 (119,753)
Net income................................... 56,315 56,315
Dividends (Per Share $.20)................... (4,257) (4,257)
Conversion of Class B Common Stock to Common
Stock...................................... 46 (46) --
Restricted Unit Plan grants, cancellations,
tax benefits and other..................... 1,401 1,401
Purchase of Treasury stock................... (27,183) (27,183)
Foreign currency translation................. (762) (762)
------ ------ -------- --------- ----------- --------- ---------
Balance at December 31, 1997...................... $ 126 $ 97 $(27,306) $(183,814) $(2,197) $ 118,855 $ (94,239)
------ ------ -------- --------- ----------- --------- ---------
------ ------ -------- --------- ----------- --------- ---------
</TABLE>

See the accompanying notes to the consolidated financial statements.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The General Chemical Group Inc. (the 'Company'), formerly known as NHO,
Inc., is a Delaware corporation formed in 1988. The Company is a diversified
manufacturing company predominantly engaged in the production of inorganic
chemicals, with manufacturing facilities located in the United States and
Canada. Through its Chemical Segment, the Company is a leading producer of soda
ash in North America, and a major North American supplier of calcium chloride,
sodium and ammonia salts, sulfites, nitrites, aluminum-based chemical products,
printing plates and refinery and chemical regeneration services to a broad range
of industrial and municipal customers. The Chemical Segment accounted for
approximately 83 percent of the Company's consolidated 1997 net revenues.
Through its Manufacturing Segment, the Company manufactures precision and highly
engineered stamped and machined metal products, principally automotive engine
parts as well as fluid-handling equipment, manual controls and trailer hitches
for the automotive market, which combined accounted for approximately 17 percent
of the Company's consolidated 1997 net revenues.

The preparation of 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

The consolidated financial statements include the accounts of the Company
and of all wholly owned and majority-owned subsidiaries and General Chemical
(Soda Ash) Partners ('GCSAP'), of which the Company indirectly owns 51 percent.
Minority interests relate solely to partnerships, primarily GCSAP, in which the
Company has a controlling interest. Intercompany balances and transactions are
eliminated in consolidation.

Inventories are valued at the lower of cost or market, using the last-in,
first-out ('LIFO') method for domestic production inventories and the first-in,
first-out ('FIFO') or average-cost method for all other inventories. Production
inventory costs include material, labor and factory overhead.

Property, plant and equipment are carried at cost. Mines and machinery and
equipment of GCSAP are depreciated using the units-of-production method. All
other plant and equipment are depreciated principally using the straight-line
method, using estimated lives which range from 3 to 35 years.

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over a 25 year
period. The Company assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation.

The Company recognizes deferred tax assets and liabilities based on
differences between financial statement and tax bases of assets and liabilities
using presently enacted tax rates.

Accruals for environmental liabilities are recorded based on current
interpretations of environmental laws and regulations when it is probable that a
liability has been incurred and the amount of such a liability can be reasonably
estimated. Liabilities for environmental matters were $16,319 and $16,244 at
December 31, 1996 and 1997, respectively. These amounts do not include estimated
third-party recoveries nor have they been discounted.

The Company provides for the expected costs to be incurred for the eventual
reclamation of mining properties pursuant to local law. Land reclamation costs
are being accrued for over the estimated remaining life of the reserves
currently under lease.

The Company does not hold or issue financial instruments for trading
purposes. Amounts to be paid or received under interest swap agreements are
recognized as increases or reductions in interest expense in the periods in
which they accrue.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The financial statements of the foreign subsidiaries of the Company have
been translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52.

All highly liquid instruments purchased with a maturity of three months or
less are considered to be cash equivalents.

The capital deficit at December 31, 1994 of $237,140 arose as a result of
dividends and distributions exceeding accumulated earnings and capital
contributions.

Certain prior-period amounts have been reclassified to conform with the
current presentation.

NOTE 2 -- INITIAL PUBLIC OFFERING

On May 15, 1996, the Company and a then principal stockholder (the 'Selling
Stockholder') completed an initial public offering (the 'Offering') of 7,925,375
shares of Common Stock at $17.50 per share. Of the shares offered, 2,500,000
were issued and sold by the Company. The net proceeds to the Company from the
Offering, after deducting underwriter's discount and related fees and expenses,
were $40,600. The Company did not receive any of the proceeds from the sale of
such shares by the Selling Stockholder.

NOTE 3 -- CAPITAL STOCK

The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, par value $.01 per share, of which 8,009,601 and 12,558,697 were
outstanding at December 31, 1996 and 1997, respectively, and 40,000,000 shares
of Class B Common Stock, par value $.01 per share, which has ten votes per
share, is subject to significant restrictions on transfer and is convertible at
any time into Common Stock on a share-for-share basis, of which 14,261,467 and
9,758,421 shares were outstanding at December 31, 1996 and 1997, respectively.
The Common Stock and Class B Common Stock are substantially identical, except
for the disparity in voting power, restriction on transfer and conversion
provisions.

The Company's Preferred Stock, par value $.01 per share consists of
10,000,000 authorized shares, none of which was outstanding at December 31, 1996
and 1997.

During the second quarter of 1997, a former stockholder converted all 4.4
million shares of its Class B Common Stock, into an identical number of shares
of Common Stock. On April 23, 1997, the Company purchased approximately, 1.3
million shares of Common Stock from the former stockholder, at a price of $20
per share. The purchase was funded from the Company's cash and cash equivalent
balance and has been recorded as treasury stock.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 4 -- EARNINGS PER SHARE

The computation of basic earnings per share is based on the weighted
average number of common shares and contingently issuable shares outstanding
during the period. The computation of diluted earnings per share assumes the
foregoing and, in addition, the exercise of all stock options and restricted
units, using the treasury stock method.

All period earnings per share figures have been restated in accordance with
the provisions of FAS No. 128. The components of the denominator for basic
earnings per common share and diluted earnings per common share are reconciled
as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Basic earnings per common share:
Weighted average common shares outstanding............... 19,736,842 21,317,657 21,424,401
---------- ---------- ----------
---------- ---------- ----------
Diluted earnings per common share:
Weighted average common shares outstanding............... 19,736,842 21,317,657 21,424,401
Options and Restricted Units............................. -- 580,891 1,078,241
---------- ---------- ----------
Denominator for diluted earnings per common share............. 19,736,842 21,898,548 22,502,642
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Options to purchase 10,000 shares of common stock were issued during 1997
but were not included in the computation of diluted earnings per common share
because the options' exercise price was greater than the average market price of
the common shares. The options, which expire on September 5, 2007, were still
outstanding at December 31, 1997.

NOTE 5 -- ACQUISITIONS

On July 1, 1997, the Company's wholly owned subsidiary General Chemical
Corporation ('GCC'), acquired all of the outstanding stock of Peridot Holdings,
Inc. ('Peridot'), a leading manufacturer and supplier of sulfuric acid and water
treatment chemicals. Funding for this transaction was provided with existing
cash and borrowings under GCC's revolving credit facility. The acquisition was
accounted for under the purchase method, and, accordingly, the net assets and
results of operations have been included in the consolidated financial
statements since the date of acquisition, based on preliminary valuation
information available to GCC, which is subject to change as such information is
finalized. The excess of purchase price over the estimated fair values of the
net tangible assets acquired has been treated as goodwill. Goodwill is being
amortized on a straight line basis over a period of 25 years. The acquisition
did not have a material pro forma impact on consolidated earnings.

On February 6, 1998, the Company's wholly owned subsidiary Toledo
Technologies, Inc. acquired all of the outstanding stock of Sandco Automotive
Ltd. ('Sandco'), a manufacturer of engine parts for the North American
automobile industry and its aftermarket. Sandco is based in Waterdown, Ontario.
Funding for this transaction was provided with new borrowings. This acquisition
will be accounted for using the purchase method.

On February 13, 1998, the Company's wholly owned subsidiary, General
Chemical Corporation, entered into an agreement to acquire, subject to certain
conditions precedent to closing, all of the outstanding stock of Reheis Inc.
('Reheis'). Reheis is headquartered in New Jersey and is the world's leading
producer and supplier of the active chemical ingredients in antiperspirants and
over-the-counter antacids as well as a supplier of pharmaceutical intermediates
and other products. Funding for this transaction will be provided by existing
cash and borrowings on GCC's revolving credit facility. GCC will account for
this transaction using the purchase method.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

NOTE 6 -- INCOME TAXES

Income before income taxes is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------

<S> <C> <C> <C>
United States................................................ $40,644 $57,282 $78,345
Foreign...................................................... 23,775 18,449 14,315
------- ------- -------
Total................................................... $64,419 $75,731 $92,660
------- ------- -------
------- ------- -------
</TABLE>

The components of the income tax provision are as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------

<S> <C> <C> <C>
United States:
Current................................................. $28,515 $18,524 $26,195
Deferred................................................ 3,544 38 (236)
Foreign:
Current................................................. 8,867 7,296 5,662
Deferred................................................ (601) (791) (836)
State:
Current................................................. 2,127 4,201 5,596
Deferred................................................ 874 (145) (36)
------- ------- -------
Total.............................................. $43,326 $29,123 $36,345
------- ------- -------
------- ------- -------
</TABLE>

A summary of the components of deferred tax assets and liabilities is as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------

<S> <C> <C>
Postretirement benefits................................................. $31,151 $31,965
Nondeductible accruals.................................................. 41,060 48,696
Foreign operations...................................................... 8,958 4,302
Other................................................................... 1,001 2,577
------- -------
Deferred tax assets................................................ 82,170 87,540
------- -------
Property, plant and equipment........................................... 31,832 43,817
Pensions................................................................ 7,437 7,237
Inventory............................................................... 2,951 3,123
Other................................................................... 1,260 1,088
------- -------
Deferred tax liabilities........................................... 43,480 55,265
------- -------
Valuation allowance..................................................... 16,090 11,434
------- -------
Net deferred tax asset........................................ $22,600 $20,841
------- -------
------- -------
</TABLE>

The Company has deferred tax assets related to foreign tax credits of
$16,090 and $11,434 at December 31, 1996 and 1997, respectively, against which a
full valuation allowance has been recorded. A valuation allowance of $1,641 was
provided during 1995. The Company reversed $1,426 and $4,656 of previously
recorded valuation allowances during 1996 and 1997, respectively, primarily
related to foreign tax credits that expired.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The difference between the effective income tax rate and the United States
statutory rate is reconciled below:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----

<S> <C> <C> <C>
U.S. federal statutory rate..................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit...................... 3.0 3.5 3.9
Tax effect of foreign operations................................ 6.7 5.1 3.1
Provision for disputed items.................................... 26.5 -- --
Depletion....................................................... (4.6) (5.3) (3.1)
Other........................................................... 0.6 0.2 0.4
---- ---- ----
Total...................................................... 67.2% 38.5% 39.3%
---- ---- ----
---- ---- ----
</TABLE>

The Internal Revenue Service (the 'IRS') examinations of the Company's
federal income tax returns resulted in the issuance of a deficiency notice
during 1995. The Company has filed an administrative appeal with the IRS
contesting the items denoted in the deficiency notice. Notwithstanding such
appeal, in 1995 the Company recorded a provision for disputed items of $17,100
for all years prior to 1995 in connection with the deficiency notice. Management
believes the amounts provided at December 31, 1997 are adequate.

NOTE 7 -- PENSION PLANS

The Company maintains several defined benefit pension plans covering
substantially all employees. A participating employee's annual postretirement
pension benefit is determined by the employee's credited service and, in most
plans, final average annual earnings with the Company. Vesting requirements are
five years in the U.S. and two years in Canada. The Company's funding policy is
to annually contribute the statutorily required minimum amount as actuarially
determined.

The net periodic pension cost for U.S. pension plans included the following
components:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- -------- --------

<S> <C> <C> <C>
Service cost (benefits earned during the year)...................... $ 3,826 $ 4,748 $ 5,217
Interest cost on projected benefit obligation....................... 12,377 13,125 13,874
Actual return on assets............................................. (24,938) (24,655) (29,520)
Net amortization and deferral....................................... 14,775 13,335 16,943
-------- -------- --------
Net periodic pension cost...................................... $ 6,040 $ 6,553 $ 6,514
-------- -------- --------
-------- -------- --------
</TABLE>

The net periodic pension cost for Canadian pension plans included the
following components:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------

<S> <C> <C> <C>
Service cost (benefits earned during the year).......................... $ 1,140 $ 1,494 $ 1,352
Interest cost on projected benefit obligation........................... 3,527 3,727 3,868
Actual return on assets................................................. (6,614) (4,662) (4,877)
Net amortization and deferral........................................... 2,457 559 522
------- ------- -------
Net periodic pension cost.......................................... $ 510 $ 1,118 $ 865
------- ------- -------
------- ------- -------
</TABLE>

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The funded status and (accrued) prepaid pension cost for all plans are as
follows:

<TABLE>
<CAPTION>
UNITED STATES CANADA
---------------------- --------------------
DECEMBER 31, DECEMBER 31,
---------------------- --------------------
1996 1997 1996 1997
--------- --------- -------- --------

<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested..................................................... $(144,887) $(156,419) $(40,421) $(42,820)
Nonvested.................................................. (13,235) (14,255) (205) (216)
--------- --------- -------- --------
Accumulated benefit obligation.................................. $(158,122) $(170,674) $(40,626) $(43,036)
--------- --------- -------- --------
--------- --------- -------- --------
Plan assets at fair value....................................... $ 166,661 $ 193,301 $ 60,224 $ 65,019
Projected benefit obligation.................................... (187,760) (202,796) (50,783) (53,796)
--------- --------- -------- --------
Projected benefit obligation (in excess of) less than plan
assets........................................................ (21,099) (9,495) 9,441 11,223
Unrecognized prior service cost................................. 6,896 6,128 942 809
Unrecognized net (gain) loss.................................... (8,712) (23,532) 8,761 6,196
--------- --------- -------- --------
(Accrued) prepaid pension cost.................................. $ (22,915) $ (26,899) $ 19,144 $ 18,228
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>

The Canadian prepaid pension cost is included in other assets on the
balance sheet.

The assumptions used in accounting for the plans in 1995, 1996 and 1997
were
<TABLE>
<CAPTION>
UNITED STATES
----------------------------------------
1995 1996 1997
---------- ---------- ----------

<S> <C> <C> <C>
Estimated discount rate.......................................... 7 1/2 % 7 1/2 % 7 1/2%
Estimated long-term rate of return on assets..................... 9 % 9 % 9%
Average rate of increase in employee compensation................ 5 % 5 % 5%

<CAPTION>
CANADA
------------------------------------
1995 1996 1997
------- ---------- ----------
<S> <<C> <C> <C>
Estimated discount rate.......................................... 8 % 8 % 7 1/2 %
Estimated long-term rate of return on assets..................... 9 % 9 % 9 %
Average rate of increase in employee compensation................ 5 1/4 % 5 1/4 % 5 1/4 %
</TABLE>

The dates used to measure plan assets and liabilities were October 31, 1996
and 1997 for all plans. Plan assets are invested primarily in stocks, bonds,
short-term securities and cash equivalents.

NOTE 8 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Company maintains several plans providing postretirement benefits
covering substantially all hourly and the majority of salaried employees. The
Company funds these benefits on a pay-as-you-go basis. The long-term portion of
accrued postretirement benefit cost of $85,442 and $86,517 at December 31, 1996
and 1997, respectively, is included in other liabilities on the balance sheet.

The net periodic postretirement benefit cost included the following
components:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------

<S> <C> <C> <C>
Service cost (benefits earned during the year).......................... $ 1,576 $ 1,765 $ 1,876
Interest cost on projected postretirement benefit obligation............ 4,862 4,451 4,906
Net amortization and deferral........................................... (2,052) (2,361) (2,191)
------- ------- -------
Net periodic postretirement benefit cost........................... $ 4,386 $ 3,855 $ 4,591
------- ------- -------
------- ------- -------
</TABLE>

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The funded status and accrued postretirement benefit obligation are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------

<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................................. $(39,797) $(44,220)
Fully eligible plan participants..................................................... (12,095) (11,158)
Other active plan participants....................................................... (17,001) (15,712)
-------- --------
Accumulated postretirement benefit obligation............................................. (68,893) (71,090)
Plan assets at fair value................................................................. -- --
-------- --------
Accumulated postretirement benefit obligation in excess of plan assets.................... (68,893) (71,090)
Unrecognized net reduction in prior service costs......................................... (12,708) (11,104)
Unrecognized net gain..................................................................... (6,293) (7,038)
-------- --------
Accrued postretirement benefit obligation................................................. $(87,894) $(89,232)
-------- --------
-------- --------
</TABLE>

The assumptions used in accounting for the plans in 1996 were an 11 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2000 and
beyond) and a 7 1/2 percent discount rate for the U.S. plans and an 11 percent
health care cost trend rate (decreasing to 7 percent in the year 2000 and
beyond), an 8 percent discount rate and a 5 1/4 percent salary scale for the
Canadian plans.

The assumptions used in accounting for the plans in 1997 were a 10 percent
health care cost trend rate (decreasing to 7 1/2 percent in the year 2000 and
beyond) and a 7 1/2 percent discount rate for the U.S. plans and an 11 percent
health care cost trend rate (decreasing to 7 percent in the year 2000 and
beyond), a 7 1/2 percent discount and a 5 1/4 percent salary scale for the
Canadian plans. A one percent increase in the health care trend rate would
increase the accumulated postretirement benefit obligation by $6,144 at year end
1997 and the net periodic cost by $572 for the year.

NOTE 9 -- COMMITMENTS AND CONTINGENCIES

Future minimum rental payments for operating leases (primarily for
transportation equipment, offices and warehouses) having initial or remaining
noncancellable lease terms in excess of one year as of December 31, 1997 are as
follows:

<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- -------------------------------------------------------------------------

<S> <C>
1998.................................................................. $10,584
1999.................................................................. 5,415
2000.................................................................. 2,034
2001.................................................................. 594
2002 and thereafter................................................... 341
-------
$18,968
-------
-------
</TABLE>

Rental expense for the years ended December 31, 1995, 1996 and 1997 was
$13,531, $15,414, and $17,393, respectively.

Parent Guaranty and Transfer Agreement. A restated parent guaranty and
transfer agreement between New Hampshire Oak, ACI International Limited and
TOSOH America, Inc. provides that in the event that either New Hampshire Oak,
ACI International Limited or TOSOH America, Inc. (such entities being referred
to as a 'transferring parent' or 'nontransferring parent' as the context
requires) proposes to sell or otherwise transfer or cause to be sold or
transferred the voting securities of GCC, the Andover Group, Inc. or TOSOH
Wyoming, Inc. (the respective subsidiaries constituting the partners of GCSAP)
as the case may be, the nontransferring parents will have the following options:

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

(1) to purchase the transferring parent's subsidiary's interest in GCSAP at fair
market value; (2) to require the transferring parent to purchase the
nontransferring parents' subsidiaries' interest in GCSAP at fair market value;
(3) to buy the voting securities to be sold by the transferring parent on the
same terms and conditions and at the same price as the transferring parent
proposes to sell or otherwise transfer or cause to be sold or transferred such
voting securities; or (4) to cause the proposed transferee to purchase the
nontransferring parents' subsidiaries' interest in GCSAP for a price reflecting
the price to be paid by the proposed transferee for such voting securities. In
the event that New Hampshire Oak ceases to own at least 51 percent of GCC while
GCC is a partner, GCC shall pay to The Andover Group, Inc. $2,833.

Richmond Works July 26, 1993 Incident. On July 26,1993 a pressure relief
device on a railroad tank car containing oleum that was being unloaded at the
Company's Richmond, California, facility, ruptured during the unloading process,
causing the release of a significant amount of sulfur trioxide. Approximately
150 lawsuits seeking substantial amounts of damages were filed against the
Company on behalf of in excess of 60,000 claimants in municipal and superior
courts of California (Contra Costa and San Francisco Counties) and in federal
court (United States District Court for the Northern District of California).
All state court cases were coordinated before a coordination trial judge (In Re
GCC Richmond Works Cases, JCCP No. 2906) and the federal court cases were stayed
until completion of the state court cases.

After several months of negotiation under the supervision of a settlement
master, the Company and a court-approved plaintiffs' management committee
executed a comprehensive settlement agreement which resolved the claims of
approximately 95 percent of the claimants who filed lawsuits arising out of the
July 26th incident, including the federal court cases. After a final settlement
approval hearing on October 27, 1995, the coordination trial judge approved the
settlement on November 22, 1995. Pursuant to the terms of the settlement
agreement, the Company, with funds to be provided by its insurers pursuant to
the terms of its insurance policies, has agreed to make available a maximum of
$180,000 to implement the settlement. In addition, the settlement agreement
provides, among other things, that while claimants may 'opt out' of the
compensatory damages portion of the settlement and pursue their own cases
separate and apart from the class settlement mechanism, they have no right to
opt out of the punitive damages portion of the settlement. Consequently, under
the terms of the settlement, no party may seek punitive damages from the Company
outside of those provided by the settlement.

Notices of appeal of all or portions of the settlement approved by the
court were filed by five law firms representing approximately 2,750 claimants,
with approximately 2,700 of these claimants represented by the same law firm.
Virtually all of these claimants have not specified the amount of their claims
in court documents, although the Company believes that their alleged injuries
are no different in nature or extent than those alleged by the settling
claimants. On May 8, 1996, the California Court of Appeals dismissed each of the
appeals that had been filed challenging the trial court's approval of the class
action settlement. The Court of Appeals dismissed the appeal relating to the
trial court's rulings on plaintiffs' attorney's fees on the ground that the
appealing attorneys lacked standing to appeal. The Court of Appeals also
dismissed each of the other pending appeals, ruling that the trial court's
orders and rulings approving the settlement were not presently appealable, if at
all, by the appealing claimants since they had all elected to opt out of the
settlement. The appealing attorneys and some of the appealing claimants then
filed a petition for review with the California Supreme Court which, on August
15, 1996, elected not to review the Court of Appeals' decision.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

Appeals' denial of their prior petition. On February 5, 1998, a hearing was held
before the coordination judge on the Company's motion to dismiss the material
claims of another 800 of the approximately 2,750 original opt-out claimants,
again primarily on the grounds that they failed to comply with previous pre-
trial orders. As of March 5, 1998, the Company is awaiting the decision of the
coordination judge on this motion.

It is possible that one or more of the appealing claimants, once their
opt-out cases are finally litigated through trial, may attempt to refile all or
a portion of the appeals that were dismissed by the Court of Appeals. While
there can be no assurances regarding how an appellate court might rule in the
event of such a refiling, the Company believes that the settlement will be
upheld on appeal. If the settlement is upheld on appeal, the Company believes
that any further liability in excess of the amounts made available under the
settlement agreement will not exceed the available insurance coverage, if at
all, by an amount that could be material to its financial condition or results
of operations. In the event of a reversal or modification of the settlement on
appeal, with respect to lawsuits by any then remaining claimants (opt-outs and
settling claimants who have not signed releases) the Company believes that,
whether or not it elects to terminate the settlement in the event it is reversed
or modified on appeal, it will have adequate resources from its available
insurance coverage to vigorously defend these lawsuits through their ultimate
conclusion, whether by trial or settlement. However, in the event the settlement
is overturned or modified on appeal, there can be no assurance that the
Company's ultimate liability resulting from the July 26, 1993 incident would not
exceed the available insurance coverage by an amount which could be material to
its financial condition or results of operations, nor is the Company able to
estimate or predict a range of what such ultimate liability might be, if any.

The Company has insurance coverage relating to this incident which totals
$200,000. The first two layers of coverage total $25,000 with a sublimit of
$12,000 applicable to the July 26, 1993 incident, and the Company also has
excess insurance policies of $175,000 over the first two layers. The Company
reached an agreement with the carrier for the first two layers whereby the
carrier paid the Company $16,000 in settlement of all claims the Company had
against that carrier. In the third quarter of 1994, the Company recorded a
$9,000 charge to earnings for costs which the Company incurred related to this
matter. The Company's excess insurance policies, which are written by two
Bermuda-based insurers, provide coverage for compensatory as well as punitive
damages. Both insurers have executed agreements with the Company confirming
their respective commitments to fund the settlement as required by their
insurance policies with the Company and as described in the settlement
agreement. In addition, these same insurers currently continue to provide
substantially the same insurance coverage to the Company.

Environmental Matters. Accruals for environmental liabilities are recorded
based on current interpretations of applicable environmental laws and
regulations when it is probable that a liability has been incurred and the
amount of such liability can be reasonably estimated. Estimates are established
based upon information available to management to date, the nature and extent of
the environmental liability, the Company's experience with similar activities
undertaken, estimates obtained from outside consultants and the legal and
regulatory framework in the jurisdiction in which the liability arose. The
potential costs related to environmental matters and their estimated impact on
future operations are difficult to predict due to the uncertainties regarding
the extent of any required remediation, the complexity and interpretation of
applicable laws and regulations, possible modification of existing laws and
regulations or the adoption of new laws or regulations in the future, and the
numerous alternative remediation methods and their related varying costs. The
material components of the Company's environmental accruals include potential
costs, as applicable, for investigation, monitoring, remediation and ongoing
maintenance activities at any affected site. Accrued liabilities for
environmental matters were $16,319 and $16,244 at December 31, 1996 and 1997,
respectively. These amounts do not include estimated third-party recoveries nor
have they been discounted.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

By letter dated March 22, 1990 from the Environmental Protection Agency
(the 'EPA'), the Company received a Notice of Potential Liability pursuant to
Section 107(a) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ('CERCLA'), as amended, with respect to a site located in
Front Royal, Virginia, owned at the time by Avtex Fibers, Inc. (the 'Avtex
Site'), which has since filed for bankruptcy. A sulfuric acid plant adjacent to
the main Avtex Site was previously owned and operated by the Company (the 'acid
plant'). The letter requested that the Company perform certain activities at the
acid plant including providing the security, preventing discharges, removing
certain specific residue and sludges from two storage vessels and the transfer
line to the main Avtex facility and determining the extent of contamination at
the site, if any. In April 1991, the Company submitted a draft work plan with
respect to the acid plant including each of the activities requested by the EPA
discussed above. The Company has provided for the estimated costs of $1,600 for
these activities in its accrual for environmental liabilities. The EPA has not
yet responded to this work plan, nor has it requested that an initial
investigation and feasibility study for the acid plant be performed. As a
result, the extent of remediation required, if any, is unknown. The Company
believes that the acid plant is separate and divisible from the main Avtex Site
and, as a result, is not subject to any liability for costs related thereto. The
Company will continue to vigorously assert this position with the EPA. There has
been very limited contact by the EPA with the Company over the past four years,
as it appears that the EPA is focused on remediation activities at the main
Avtex Site.

In addition to the matters discussed above, the Company is involved in
other claims, litigation, administrative proceedings and investigations and
remediation relative to environmental matters. Although the amount of any
ultimate liability which could arise with respect to these matters cannot be
accurately predicted, it is the opinion of management, based upon currently
available information and the accruals established, that any such liability will
have no material adverse effect on the Company's financial condition, results of
operations or cash flows.

NOTE 10 -- RELATED PARTY TRANSACTIONS

MANAGEMENT AGREEMENT

The Company is party to a management agreement with Latona Associates
(which is controlled by a stockholder of the Company) under which the Company
receives corporate supervisory and administrative services and strategic
guidance for a quarterly fee of $1,375, $1,400 and $1,460 in 1995, 1996 and
1997, respectively. In addition, in connection with any acquisition or business
combination with respect to which Latona Associates advises the Company, the
Company has agreed to pay Latona Associates additional fees comparable with fees
received by investment banking firms for such services. This agreement expires
on December 31, 2004.

NOTE 11 -- ADDITIONAL FINANCIAL INFORMATION

The following are summaries of selected balance sheet items:

RECEIVABLES

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Trade................................................................. $104,108 $120,385
Other................................................................. 3,737 8,577
Allowance for doubtful accounts....................................... (5,367) (6,242)
-------- --------
$102,478 $122,720
-------- --------
-------- --------
</TABLE>

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

INVENTORIES

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Raw materials........................................................... $11,022 $10,875
Work in process......................................................... 4,900 3,295
Finished products....................................................... 17,403 21,209
Supplies and containers................................................. 8,104 10,579
------- -------
$41,429 $45,958
------- -------
------- -------
</TABLE>

Inventories valued at LIFO amounted to $20,153 and $18,546 at December 31,
1996 and 1997, respectively, which were below estimated replacement cost by
$3,088 and $4,480, respectively. The impact of LIFO liquidations in 1995, 1996
and 1997 was not significant.

PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
--------- ---------
<S> <C> <C>
Land and improvements............................................... $ 27,299 $ 40,800
Machinery and equipment............................................. 315,544 387,403
Buildings and leasehold improvements................................ 42,968 48,244
Construction in progress............................................ 17,597 17,524
Mines and quarries.................................................. 13,539 13,658
--------- ---------
416,947 507,629
Less accumulated depreciation and amortization...................... (177,128) (203,440)
--------- ---------
$ 239,819 $ 304,189
--------- ---------
--------- ---------
</TABLE>

ACCRUED LIABILITIES

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Wages, salaries and benefits............................................ $22,235 $24,317
Interest................................................................ 5,752 5,387
Taxes, other than income taxes.......................................... 13,060 10,871
Other................................................................... 33,158 32,683
------- -------
$74,205 $73,258
------- -------
------- -------
</TABLE>

NOTE 12 -- LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
MATURITIES 1996 1997
---------- -------- --------
<S> <C> <C> <C>
GCC Debt:
Bank Term Loan -- floating rate.............................. 1996-2001 $ 82,609 $ 65,217
Senior Subordinated Notes -- 9.25%........................... 2003 100,000 100,000
Canada Senior Notes -- 9.09%................................. 1999 52,000 50,787
U.S. Revolving Credit Facility -- floating rate.............. 1999 -- 42,000
-------- --------
Total Debt................................................... 234,609 258,004
Less: Current Portion........................................ 17,392 17,392
-------- --------
Net Long-Term Debt........................................... $217,217 $240,612
-------- --------
-------- --------
</TABLE>

Aggregate maturities of long-term debt for each of the years in the five
year period ending December 31, 2002 are $17,392, $110,179, $17,392, $13,041 and
$0, respectively.

The U.S. Revolving Credit Facility expires on March 31, 1999 and allows
General Chemical to borrow up to $130,000, including letters of credit of up to
$30,000. The unused letter of credit balance

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

was $21,033 at December 31, 1996 and 1997. This facility bears interest at a
rate equal to a spread over a reference rate chosen by the Company from various
options. At December 31, 1996 there were no outstanding borrowings under this
facility. The rate in effect at December 31, 1997 was 7 percent.

General Chemical Canada Limited has a $15,000 (Canadian Dollar) Revolving
Credit Facility maturing June 22, 2000. This facility bears interest at a rate
equal to a spread over a reference rate chosen by General Chemical Canada
Limited from various options. At December 31, 1996 and 1997, there were no
outstanding borrowings under this facility.

Commitment fees paid for the abovementioned facilities were $350, $414, and
$274 for 1995, 1996 and 1997, respectively.

The Bank Term Loan bears interest at a rate equal to a spread over a
reference rate chosen by GCC from various options. The rate in effect at
December 31, 1996 and 1997, including effects of interest rate swap hedge
agreements (see Note 14), was 7.4 percent.

The U.S. Revolving Credit Facility and the Bank Term Loan are secured by
(1) substantially all of the assets of GCC, (2) 65 percent of the capital stock
of General Chemical Canada Holding Inc., (3) GCC's 51 percent general
partnership interest in GCSAP, and (4) all of the stock of the other direct and
indirect subsidiaries of GCC.

While the Company's GCC subsidiaries' debt facilities are outstanding, GCC
must meet specific financial tests on an ongoing basis, which are customary for
these types of facilities. Except as provided by applicable corporate law, there
are no restrictions on the Company's ability to pay dividends from retained
earnings. However, the payment of cash dividends by GCC to the Company is
subject to certain restrictions under the terms of various agreements covering
GCC's long-term debt. Assuming certain financial covenants are met, GCC is
permitted to pay cash dividends of up to 50 percent of the net income (subject
to certain adjustments) of GCC for the applicable period. Consequently, the
Company's ability to pay cash dividends on Common Stock may effectively be
limited by such agreements. At December 31, 1997, approximately $62.2 million
was available for dividend payments in accordance with these covenants.

NOTE 13 -- STOCK OPTION PLAN AND RESTRICTED UNIT PLAN

The Company's 1996 Stock Option and Incentive Plan (the 'Plan') provides
for the issuance of up to 2,200,000 shares of Common Stock. The Plan authorizes
the granting of incentive and nonqualified stock options, stock appreciation
rights, restricted and unrestricted stock and performance share awards to
executives, directors and other key persons. Any incentive stock options granted
under the Plan must have an exercise price at least equal to the market value of
the shares on the day the option is granted and a maximum term of 10 years.

Information with respect to all stock options is summarized below:

<TABLE>
<CAPTION>
AVERAGE OPTION
SHARES PRICE PER SHARE
---------- ---------------

<S> <C> <C>
Options Outstanding at December 31, 1995........................ -- $--
Options Granted............................................ 1,281,000 17.66
Options Exercised.......................................... -- --
Options Forfeited.......................................... 10,000 17.50
----------
Options Outstanding at December 31, 1996........................ 1,271,000 17.66
Options Granted............................................ 100,000 22.70
Options Exercised.......................................... -- --
Options Forfeited.......................................... 29,800 18.23
----------
Options Outstanding at December 31, 1997........................ 1,341,200 $ 18.02
---------- -------
---------- -------
</TABLE>

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

The Company applies APB Opinion 25 in accounting for the Plan. Had
compensation cost for this plan been determined under FASB Statement No. 123,
the Company's net income for 1997 would have been reduced to $55,140 with basic
earnings per common share of $2.57 and diluted earnings per share of $2.45. Net
income for 1996 would have been reduced to $45,623 with basic earnings per
common share of $2.14 and diluted earnings per share of $2.08. For purposes of
this calculation, the fair value of each option grant was estimated on the grant
date using the Black-Scholes option-pricing model with the following assumptions
used for 1997 and 1996: dividend yield of 0.7 percent and 1.0 percent,
respectively; expected volatility of 41 percent and 27 percent, respectively;
weighted average risk free interest rate of 5.50 percent and 6.42 percent,
respectively; and, weighted average expected lives of 6 and 7 years,
respectively. All options granted to date under the stock option plan have an
exercise price equal to the market price of the Company's stock on the grant
date.

The Company's Restricted Unit Plan provides for the issuance of 850,000
units, with each unit representing one share of Common Stock to be issued to the
participant upon the occurrence of certain conditions ('vesting') unless the
participant elects to defer receipt thereof. All awards are subject to a five
year vesting schedule under which a portion of each participant's award vests
annually over a five year period. Dividend equivalents on outstanding units
accrue to the benefit of the participants and are paid at the time dividends are
paid to Common Stock shareholders. These units were awarded during the second
quarter of 1996 in replacement of the rights earned by participants beginning in
1989 under the Phantom Equity Plan and certain other prior equity programs of
the Company which were then terminated. The Company recorded a charge to income
of $11,319 and $1,302 for 1996 and 1997, respectively, with a contra credit to
capital deficit.

NOTE 14 -- FINANCIAL INSTRUMENTS

SWAP AGREEMENTS

The Company does not enter into financial instruments for trading purposes.
The Company periodically enters into interest rate swap agreements to
effectively convert all or a portion of its floating-rate debt to fixed-rate
debt in order to reduce the Company's risk to movements in interest rates. Such
agreements involve the exchange of fixed and floating interest rate payments
over the life of the agreement without the exchange of the underlying principal
amounts. Accordingly, the impact of fluctuations in interest rates on these
interest rate swap agreements is fully offset by the opposite impact on the
related debt. Swap agreements are only entered into with strong creditworthy
counterparties. The swap agreements in effect were as follows:

<TABLE>
<CAPTION>
INTEREST RATE
NOTIONAL --------------------
DECEMBER 31, AMOUNT MATURITIES RECEIVE(1) PAY(2)
- ------------------------------------------------ -------- ---------- ---------- ------

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

(1) Three-month LIBOR.

(2) Represents the weighted average rate.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

In addition to the swap agreements described above, the Company has entered
into a forward swap agreement, which will begin in 1998 and mature in 2002,
which has a notional amount of $30,000 and a fixed payment rate of 6.6 percent.

At December 31, 1997, the Company was also party to a currency and interest
rate swap, which partially hedges the Company's Canadian subsidiary's 52,000
U.S. dollar 9.09% Senior Notes. The agreement, which matures in 1999, provides
for the payment of 48,400 Canadian dollars at a fixed rate of 7.54% in exchange
for the receipt of 35,000 U.S. dollars at a fixed rate of 9.09%. Unrealized
gains and losses on the currency portion of the swap are recognized and offset
the foreign exchange gain or loss on the related debt in the consolidated
statements of operations. Net amounts paid or received on the interest portion
of the swap are accrued as adjustments to interest expense.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------

<S> <C> <C> <C> <C>
Long-term debt......................................... $234,609 $238,967 $258,004 $262,918
Unrealized gain (loss) on swap agreements.............. $ -- $ (1,200) $ -- $ 521
</TABLE>

The fair values of cash and cash equivalents, receivables and payables
approximate their carrying values due to the short-term nature of the
instruments.

The fair value of the Company's long-term debt was based on quoted market
prices for publicly traded notes and discounted cash flow analyses on its
nontraded debt. The fair value of the Company's interest rate swap agreements is
the estimated amount the Company would have to pay or receive to terminate the
swap agreements based upon quoted market prices as provided by financial
institutions which are counterparties to the swap agreements.

NOTE 15 -- GEOGRAPHIC AND INDUSTRY SEGMENT INFORMATION

Geographic area information is summarized as follows:

<TABLE>
<CAPTION>
UNITED STATES(1) FOREIGN(2) ELIMINATIONS(3) TOTAL
---------------- ---------- --------------- --------

<S> <C> <C> <C> <C>
Net revenues:
1995.................................... $467,347 $ 122,659 $ (39,135) $550,871
1996.................................... 544,029 128,345 (48,715) 623,659
1997.................................... 574,060 121,762 (42,845) 652,977
Operating profit:
1995.................................... $ 80,390 $ 26,607 $ -- $106,997
1996.................................... 106,548 22,668 -- 129,216
1997.................................... 118,474 18,618 -- 137,092
Identifiable assets at December 31:
1995.................................... $331,237 $ 100,088 $ -- $431,325
1996.................................... 384,352 100,785 -- 485,137
1997.................................... 461,267 100,370 -- 561,637
</TABLE>

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

(1) Includes export sales amounting to $59,320, $71,413 and $79,462 for the
years ended December 31, 1995, 1996 and 1997, respectively.

(2) Principally of General Chemical Canada Holding Inc., a wholly owned
subsidiary of GCC.

(3) Sales between geographic areas are recorded at prices comparable to market
prices charged to third-party customers and are eliminated in consolidation.

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
(DOLLARS IN THOUSANDS)

Industry segment information is summarized as follows:

<TABLE>
<CAPTION>
CHEMICALS MANUFACTURING CORPORATE TOTAL
--------- ------------- --------- --------

<S> <C> <C> <C> <C>
Net revenues:
1995........................................... $ 480,926 $ 69,945 $ -- $550,871
1996........................................... 534,434 89,225 -- 623,659
1997........................................... 544,812 108,165 -- 652,977
Operating profit:
1995........................................... $ 105,186 $ 4,337 $(2,526) $106,997
1996........................................... 123,695 12,472 (6,951) 129,216
1997........................................... 117,858 23,531 (4,297) 137,092
Identifiable assets at December 31:
1995........................................... $ 377,014 $ 49,833 $ 4,478 $431,325
1996........................................... 424,864 55,151 5,122 485,137
1997........................................... 501,937 56,586 3,114 561,637
Capital expenditures:
1995........................................... $ 29,099 $ 4,994 $ -- $ 34,093
1996........................................... 52,546 1,619 -- 54,165
1997........................................... 54,031 2,640 -- 56,671
Depreciation and amortization:
1995........................................... $ 26,188 $ 2,020 $ 50 $ 28,258
1996........................................... 26,978 2,767 -- 29,745
1997........................................... 30,486 2,608 -- 33,094
</TABLE>

NOTE 16 -- UNAUDITED QUARTERLY INFORMATION

<TABLE>
<CAPTION>
1997
--------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C>
Net revenues......................................... $149,566 $164,957 $169,842 $168,612 $652,977
Gross profit......................................... 45,202 54,642 52,395 49,296 201,535
Net income........................................... 11,714 17,258 15,102 12,241 56,315
Earnings per common share:
Basic........................................... .53 .81 .72 .58 2.63
Diluted......................................... .50 .77 .68 .55 2.50
</TABLE>

<TABLE>
<CAPTION>
1996
--------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- --------

<S> <C> <C> <C> <C> <C>
Net revenues......................................... $144,571 $160,130 $161,967 $156,991 $623,659
Gross profit......................................... 41,511 53,067 51,730 54,718 201,026
Net income........................................... 9,316 7,042(1) 14,634 15,616 46,608
Earnings per common share:
Basic........................................... .47 .34 .66 .70 2.19
Diluted......................................... .47 .33 .63 .67 2.13
</TABLE>

Note: Basic earnings per common share calculations are based on the weighted
average number of shares outstanding during each of the quarters. Diluted
earnings per common share assume the foregoing and, in addition, the
exercise of all stock options and restricted units. The sum of the four
quarters may not equal the full year computation due to rounding. All
prior period per share figures have been restated in accordance with FAS
128.

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

(1) In the second quarter of 1996, the Company recorded a one-time pre-tax
charge of $12.5 million ($7.6 million after-tax or $.35 per share) due
primarily to awards made under the Restricted Unit Plan, reflecting the
portion earned under prior equity programs.

<PAGE>

<PAGE>
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

Directors. For information relating to the Company's Directors, see the
information contained under the caption 'Election of Directors -- Board of
Director Nominees' in the Company's definitive 1998 Proxy Statement (the 'Proxy
Statement'), which information is hereby incorporated by reference.

Executive Officers. For information relating to the Company's executive
officers, see the information contained under the caption 'Executive Officers
and Key Employees' in Part I of this report.

Compliance with Section 16(a) of the Exchange Act. For information relating
to the Company's compliance with Section 16(a) of the Exchange Act, see the
information contained under the caption 'Section 16(a) Beneficial Ownership
Reporting Compliance' in the Company's Proxy Statement, which information is
hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation. For information relating to the compensation of the
Company's executives, see the information contained under the caption
'Compensation of Executive Officers and Key Employees' and 'Election of
Directors -- Compensation of Directors' in the Company's Proxy Statement, which
information is hereby incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners. For information relating
to the beneficial ownership of more than five percent of the Company's Common
stock and Class B Common Stock, see the information contained under the caption
'Principal Stockholders' in the Company's Proxy Statement, which information is
hereby incorporated by reference.

Security Ownership of Management. For information relating to the
beneficial ownership of the Company's Common Stock and Class B Common Stock by
Management, see the information contained under the caption 'Management
Stockholders' in the Company's Proxy Statement, which information is hereby
incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain Relationships and Related Transactions. For information relating to
certain relationships and related transactions of the Company, see the
information contained under the caption 'Certain Relationships and Transactions'
in the Company's Proxy Statement, which information is hereby incorporated by
reference.

<PAGE>

<PAGE>
PART IV

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

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- ----------------------------------------------------------------------------------------------------------
<C> <S>
3.1 -- Amended and Restated Certificate of Incorporation of the Company
**3.2 -- Amended and Restated By-Laws of the Company
**4.1 -- Specimen Certificate for shares of Common Stock, $.01 par value, of the Company
*10.1 -- Agreement dated as of March 15, 1996 between Paul M. Montrone and the Company
**10.2 -- Amended and Restated Management Agreement effective as of January 1, 1995 between the Company and
Latona Associates, Inc.
'D'10.4 -- Restated Environmental Matters Agreement among Allied-Signal, Henley, The Wheelabrator Group Inc., New
Hampshire Oak, Inc., and Fisher Scientific Group Inc., dated as of February 26, 1986, as amended and
restated as of July 28, 1989
'D'10.5 -- Second Amended and Restated Partnership Agreement of GCSAP dated June 30, 1992, among General Chemical,
The Andover Group, Inc., and TOSOH Wyoming, Inc.
'D'10.6 -- Amended and Restated Parent Guaranty and Transfer Agreement dated June 30, 1992, among New Hampshire
Oak, Inc., ACI International Limited and TOSOH America, Inc.
**10.7 -- The General Chemical Group Inc. Deferred Compensation Plan for Non-Employee Directors
**10.8 -- The General Chemical Group Inc. Retirement Plan for Non-Employee Directors
**10.9 -- The General Chemical Group Inc. Restricted Unit Plan for Non-Employee Directors
**10.10 -- The General Chemical Group Inc. 1996 Stock Option and Incentive Plan
**10.11 -- The General Chemical Group Inc. Performance Plan
**10.12 -- The General Chemical Group Inc. Restricted Unit Plan
'D'D'10.13 -- First Amendment to General Chemical Corporation Equity Program, effective as of October 1, 1993.
**10.14 -- General Chemical Group Dividend Award Program, as amended December 15, 1995, effective as of October 1,
1993
**10.15 -- General Chemical Corporation Supplemental Savings and Retirement Plan
'D'10.16 -- Indenture dated as of August 15, 1993 between General Chemical and Continental Bank, National
Association, as trustee, with respect to the Senior Subordinated Notes
**10.17 -- Credit Agreement dated as of April 22, 1994 between Toledo Technologies and Wells Fargo Bank ('Wells')
as agent, with respect to revolving and term loan facilities ('Toledo Agreement')
**10.18 -- First Amendment to Toledo Agreement dated as of August 15, 1995
**10.19 -- Credit Agreement dated as of April 22, 1994 between PDI and Wells as agent, with respect to revolving
and term loan facilities ('PDI Agreement')
**10.20 -- First Amendment to PDI Agreement dated as of March 27, 1995
**10.21 -- Credit Agreement dated as of April 22, 1994 between Balcrank and Wells, as agent, with respect to a
revolving credit facility ('Balcrank Agreement')
**10.22 -- Note Agreement dated as of April 1, 1992, among GC Canada and certain noteholders, with respect to the
9.09% Senior Notes due 1999 in aggregate principal amount of $52 million
'D'10.23 -- Credit Agreement dated as of June 22, 1992, between GC Canada and The Toronto-Dominion Bank, with
respect to a $15 million revolving credit facility (the 'Canada Revolver')
**10.24 -- First Amendment to Canada Revolver
**10.25 -- Amended and Restated Credit Agreement dated as of September 15, 1993 among General Chemical and
Chemical Bank, as Administrative Agent and NationsBank of North Carolina, as Co-Agent, with respect to a
$130 million revolving credit facility (the 'US Revolver')
**10.26 -- First Amendment to the US Revolver dated as of December 11, 1995
**10.27 -- Term Loan Agreement dated as of August 4, 1994 among General Chemical and Chemical Bank, as
Administrative Agent, and NationsBank of North Carolina, as Co-Agent, with respect to a $100 million
term loan
**10.28 -- Settlement Agreement relating to July 26, 1993 Richmond incident litigation
10.29 -- Stockholder Agreement among the Company, the GRAT, Paul M. Montrone and Sandra G. Montrone, dated as of
April 15, 1996
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- -------- ----------------------------------------------------------------------------------------------------------
<C> <S>
10.30 -- Stockholder Agreement between the Company and Stonor, dated as of May 15, 1996
11 -- Statement regarding computation of per share earnings
**21 -- Subsidiaries of the Company
27.1 -- Financial Data Schedule
27.2 -- Restated Financial Data Schedule
27.3 -- Restated Financial Data Schedule
</TABLE>

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

** Incorporated by reference to the relevant exhibit to the Company's
Registration Statement filed with the Securities and Exchange Commission (the
'SEC') on May 3, 1996, File No. 33-83766.

'D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Registration Statement filed with the SEC on August 11, 1993,
File No. 33-64824.

'D'D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed with the SEC.

FINANCIAL STATEMENTS

See Item 8, beginning on page 16.

FINANCIAL STATEMENT SCHEDULES

See Index to Financial Statement Schedule on page 41.

REPORTS ON FORM 8-K

No report on Form 8-K has been filed by the Company during the last quarter
of the period covered by this report.

<PAGE>

<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Parsippany, State
of New Jersey on the 22nd day of March 1998.

THE GENERAL CHEMICAL GROUP INC.

By: /s/ RALPH M. PASSINO
...................................
RALPH M. PASSINO
VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
March 22, 1998

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 in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ -------------------------------------------- -------------------

<C> <S> <C>
/S/ PAUL M. MONTRONE Chairman of the Board and Director March 22, 1998
.........................................
(PAUL M. MONTRONE)

/S/ RICHARD R. RUSSELL President, Chief Executive Officer March 22, 1998
......................................... (Principal Executive Officer) and Director
(RICHARD R. RUSSELL)

/S/ RALPH M. PASSINO Vice President and Chief Financial Officer March 22, 1998
......................................... (Principal Financial and
(RALPH M. PASSINO) Accounting Officer)

/S/ PHILIP E. BEEKMAN Director March 22, 1998
.........................................
(PHILIP E. BEEKMAN)

/S/ JOHN W. GILDEA Director March 22, 1998
.........................................
(JOHN W. GILDEA)

/S/ GERALD J. LEWIS Director March 22, 1998
.........................................
(GERALD J. LEWIS)

/S/ PAUL M. MEISTER Director March 22, 1998
.........................................
(PAUL M. MEISTER)

/S/ SCOTT M. SPERLING Director March 22, 1998
.........................................
(SCOTT M. SPERLING)

/S/ IRA STEPANIAN Director March 22, 1998
.........................................
(IRA STEPANIAN)
</TABLE>

<PAGE>

<PAGE>
THE GENERAL CHEMICAL GROUP INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES

Schedule II -- Valuation and Qualifying Accounts..............................42

Schedules required by Article 12 of Regulation S-X, other than those listed
above, are omitted because of the absence of the conditions under which they are
required or because the required information is included in the consolidated
financial statements or notes thereto.

<PAGE>

<PAGE>
SCHEDULE II

THE GENERAL CHEMICAL GROUP INC.
VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
TRANSLATION
BALANCE AT ADDITIONS DEDUCTIONS ADJUSTMENT BALANCE AT
BEGINNING CHARGED TO FROM DURING END OF
OF PERIOD INCOME RESERVES PERIOD PERIOD
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful accounts.............. $5,960 $298 $ (564) $(20) $5,674
Year ended December 31, 1996
Allowance for doubtful accounts.............. $5,674 $174 $ (481) -$- $5,367
Year ended December 31, 1997
Allowance for doubtful accounts.............. $5,367 $890 $ 8 $(23) $6,242
</TABLE>

<PAGE>

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- -------- --------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
3.1 -- Amended and Restated Certificate of Incorporation of the Company................................
**3.2 -- Amended and Restated By-Laws of the Company.....................................................
**4.1 -- Specimen Certificate for shares of Common Stock, $.01 par value, of the Company.................
**10.1 -- Agreement dated as of March 15, 1996 between Paul M. Montrone and the Company...................
**10.2 -- Amended and Restated Management Agreement effective as of January 1, 1995 between the Company
and Latona Associates, Inc.......................................................................
'D'10.4 -- Restated Environmental Matters Agreement among Allied-Signal, Henley, The Wheelabrator Group
Inc., New Hampshire Oak, Inc., and Fisher Scientific Group Inc., dated as of February 26, 1986,
as amended and restated as of July 28, 1989......................................................
'D'10.5 -- Second Amended and Restated Partnership Agreement of GCSAP dated June 30, 1992, among General
Chemical, The Andover Group, Inc., and TOSOH Wyoming, Inc........................................
'D'10.6 -- Amended and Restated Parent Guaranty and Transfer Agreement dated June 30, 1992, among New
Hampshire Oak, Inc., ACI International Limited and TOSOH America, Inc............................
**10.7 -- The General Chemical Group Inc. Deferred Compensation Plan for Non-Employee Directors...........
**10.8 -- The General Chemical Group Inc. Retirement Plan for Non-Employee Directors......................
**10.9 -- The General Chemical Group Inc. Restricted Unit Plan for Non-Employee Directors.................
**10.10 -- The General Chemical Group Inc. 1996 Stock Option and Incentive Plan............................
**10.11 -- The General Chemical Group Inc. Performance Plan................................................
**10.12 -- The General Chemical Group Inc. Restricted Unit Plan............................................
'D'D'10.13 -- First Amendment to General Chemical Corporation Equity Program, effective as of October 1,
1993.............................................................................................
**10.14 -- General Chemical Group Dividend Award Program, as amended December 15, 1995, effective as of
October 1, 1993..................................................................................
**10.15 -- General Chemical Corporation Supplemental Savings and Retirement Plan...........................
'D'10.16 -- Indenture dated as of August 15, 1993 between General Chemical and Continental Bank, National
Association, as trustee, with respect to the Senior Subordinated Notes...........................
**10.17 -- Credit Agreement dated as of April 22, 1994 between Toledo Technologies and Wells Fargo Bank
('Wells') as agent, with respect to revolving and term loan facilities ('Toledo Agreement')......
**10.18 -- First Amendment to Toledo Agreement dated as of August 15, 1995.................................
**10.19 -- Credit Agreement dated as of April 22, 1994 between PDI and Wells as agent, with respect to
revolving and term loan facilities ('PDI Agreement').............................................
**10.20 -- First Amendment to PDI Agreement dated as of March 27, 1995.....................................
**10.21 -- Credit Agreement dated as of April 22, 1994 between Balcrank and Wells, as agent, with respect
to a revolving credit facility ('Balcrank Agreement')............................................
**10.22 -- Note Agreement dated as of April 1, 1992, among GC Canada and certain noteholders, with respect
to the 9.09% Senior Notes due 1999 in aggregate principal amount of $52 million..................
'D'10.23 -- Credit Agreement dated as of June 22, 1992, between GC Canada and The Toronto-Dominion Bank,
with respect to a $15 million revolving credit facility (the 'Canada Revolver')..................
**10.24 -- First Amendment to Canada Revolver..............................................................
**10.25 -- Amended and Restated Credit Agreement dated as of September 15, 1993 among General Chemical and
Chemical Bank, as Administrative Agent and NationsBank of North Carolina, as Co-Agent, with
respect to a $130 million revolving credit facility (the 'US Revolver')..........................
**10.26 -- First Amendment to the US Revolver dated as of December 11, 1995................................
**10.27 -- Term Loan Agreement dated as of August 4, 1994 among General Chemical and Chemical Bank, as
Administrative Agent, and NationsBank of North Carolina, as Co-Agent, with respect to a $100
million term loan................................................................................
**10.28 -- Settlement Agreement relating to July 26, 1993 Richmond incident litigation.....................
10.29 -- Stockholder Agreement among the Company, the GRAT, Paul M. Montrone and Sandra Montrone, dated
April 15, 1996...................................................................................
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- -------- --------------------------------------------------------------------------------------------------- ----
<C> <S> <C>
10.30 -- Stockholder Agreement between the Company and Stonor, dated May 15, 1996........................
11 -- Statement regarding computation of per share earnings........................................... 50
**21 -- Subsidiaries of the Company.....................................................................
27.1 -- Financial Data Schedule......................................................................... 51
27.2 -- Restated Financial Data Schedule................................................................ 52
27.3 -- Restated Financial Data Schedule................................................................ 53
</TABLE>

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

** Incorporated by reference to the relevant exhibit to the Company's
Registration Statement filed with the Securities and Exchange Commission (the
'SEC') on May 3, 1996, File No. 33-83766.

'D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Registration Statement filed with the SEC on August 11, 1993,
File No. 33-64824.

'D'D' Incorporated by reference to the relevant exhibit to General Chemical
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed with the Securities and Exchange Commission.

<PAGE>

<PAGE>
EXHIBIT 11

THE GENERAL CHEMICAL GROUP INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)

Earnings per share were calculated as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------

<S> <C> <C> <C>
Basic
Total income used for basic earnings per share.............................. $21,093 $46,608 $56,315
------- ------- -------
------- ------- -------
Weighted average common shares outstanding.................................. 19,737 21,318 21,424
Basic earnings per common share............................................. $ 1.07 $ 2.19 $ 2.63
------- ------- -------
------- ------- -------
Diluted
Total income used for diluted earnings per share............................ $21,093 $46,608 $56,315
------- ------- -------
------- ------- -------
Weighted average common shares outstanding.................................. 19,737 21,318 21,424
Weighted average common equivalent shares................................... -- 581 1,079
------- ------- -------
Weighted average common and common equivalent shares........................ 19,737 21,899 22,503
------- ------- -------
------- ------- -------
Diluted earnings per common share and common equivalent share............... $ 1.07 $ 2.13 $ 2.50
------- ------- -------
------- ------- -------
</TABLE>

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

All prior period per share figures have been restated in accordance with FAS
128.

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Form 10-K for the period ended December 31, 1997 and
is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<S> <C>
<CASH> 21,753
<SECURITIES> 0
<RECEIVABLES> 128,962
<ALLOWANCES> 6,242
<INVENTORY> 45,958
<CURRENT-ASSETS> 206,946
<PP&E> 507,629
<DEPRECIATION> 203,440
<TOTAL-ASSETS> 561,637
<CURRENT-LIABILITIES> 156,558
<BONDS> 240,612
0
0
<COMMON> 223
<OTHER-SE> (94,462)
<TOTAL-LIABILITY-AND-EQUITY> 561,637
<SALES> 652,977
<TOTAL-REVENUES> 652,977
<CGS> 451,442
<TOTAL-COSTS> 451,442
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 890
<INTEREST-EXPENSE> 21,602
<INCOME-PRETAX> 92,660
<INCOME-TAX> 36,345
<INCOME-CONTINUING> 56,315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,315
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.50

<PAGE>

<ARTICLE> 5
<RESTATED>
<PERIOD-START> JAN-01-1996 JAN-01-1996 JAN-01-1996
<PERIOD-TYPE> 12-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 JUN-30-1996 SEP-30-1996

<S> <C> <C> <C>
<CASH> 51,700 28,037 48,018
<SECURITIES> 0 0 0
<RECEIVABLES> 107,845 118,615 114,571
<ALLOWANCES> 5,367 5,606 5,657
<INVENTORY> 41,429 43,495 37,527
<CURRENT-ASSETS> 209,024 200,310 209,556
<PP&E> 409,915 387,911 400,020
<DEPRECIATION> 170,096 165,062 171,028
<TOTAL-ASSETS> 485,137 461,492 476,764
<CURRENT-LIABILITIES> 150,869 150,334 154,551
<BONDS> 217,217 230,912 221,565
0 0 0
0 0 0
<COMMON> 223 222 222
<OTHER-SE> (119,976) (148,650) (134,718)
<TOTAL-LIABILITY-AND-EQUITY> 485,137 461,492 476,764
<SALES> 623,659 304,701 466,668
<TOTAL-REVENUES> 623,659 304,701 466,668
<CGS> 422,633 210,123 320,360
<TOTAL-COSTS> 422,633 210,123 320,360
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 174 310 117
<INTEREST-EXPENSE> 23,748 12,709 18,349
<INCOME-PRETAX> 75,731 26,571 50,384
<INCOME-TAX> 29,123 10,213 19,392
<INCOME-CONTINUING> 46,608 16,358 30,992
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 46,608 16,358 30,992
<EPS-PRIMARY> 2.19 .81 1.47
<EPS-DILUTED> 2.13 .80 1.43

<PAGE>

<ARTICLE> 5
<RESTATED>
<PERIOD-START> JAN-01-1997 JAN-01-1997 JAN-01-1997
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997

<S> <C> <C> <C>
<CASH> 63,164 22,883 29,646
<SECURITIES> 0 0 0
<RECEIVABLES> 109,889 131,712 126,859
<ALLOWANCES> 4,577 4,578 4,898
<INVENTORY> 41,424 41,560 40,009
<CURRENT-ASSETS> 224,861 206,746 208,385
<PP&E> 420,909 429,600 491,201
<DEPRECIATION> 183,727 187,890 194,284
<TOTAL-ASSETS> 497,634 483,869 558,981
<CURRENT-LIABILITIES> 150,464 153,020 172,637
<BONDS> 212,869 208,615 234,218
0 0 0
0 0 0
<COMMON> 223 223 223
<OTHER-SE> (109,136) (119,586) (105,489)
<TOTAL-LIABILITY-AND-EQUITY> 497,634 485,137 558,981
<SALES> 149,566 314,523 484,365
<TOTAL-REVENUES> 149,566 314,523 484,365
<CGS> 104,364 214,679 332,126
<TOTAL-COSTS> 104,364 214,679 332,126
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 11
<INTEREST-EXPENSE> 5,257 10,350 16,061
<INCOME-PRETAX> 19,267 47,645 72,347
<INCOME-TAX> 7,553 18,673 28,273
<INCOME-CONTINUING> 11,714 28,872 44,074
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 11,714 28,972 44,074
<EPS-PRIMARY> .53 1.34 2.06
<EPS-DILUTED> .50 1.27 1.95

</TABLE>