<PAGE>
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549 

                                   FORM 10-K
(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

                              OWENS-ILLINOIS, INC.
             (Exact name of registrant as specified in its charter)

          Delaware                          1-9576              22-2781933
(State or other jurisdiction of          (Commission          (IRS Employer
incorporation or organization)           file number)      Identification No.)

   One SeaGate, Toledo, Ohio                                        43666
(Address of principal executive offices)                          (Zip Code)

      Registrant's telephone number, including area code:  (419) 247-5000

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

                                                Name of each exchange on
Title of each class                                  which registered
- -------------------                             ------------------------
Common Stock, $.01 par value                    New York Stock Exchange
7.85% Senior Notes due 2004                     New York Stock Exchange
8.10% Senior Notes due 2007                     New York Stock Exchange
11% Senior Debentures due December 1, 2003      New York Stock Exchange


       Securities registered pursuant to Section 12(g) of the Act:  None
















                              (Cover page 1 of 2 pages)

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


       
      Yes        x                        No                 
          -----------------                  -----------------

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

     The aggregate market value (based on the consolidated tape closing price on
February 28, 1998) of the voting stock beneficially held by non-affiliates of
Owens-Illinois, Inc. was approximately $3,965,023,000.  For the sole purpose of
making this calculation, the term "non-affiliate" has been interpreted to 
exclude directors and executive officers of the Company.  Such interpretation 
is not intended to be, and should not be construed to be, an admission by 
Owens-Illinois, Inc. or such directors or executive officers of the Company 
that such directors and executive officers of the company are "affiliates" of 
Owens-Illinois, Inc., as that term is defined under the Securities Act of 1934.


     The number of shares of Common Stock, $.01 par value, of Owens-Illinois,
Inc. outstanding as of February 28, 1998, was 140,609,608.



                      DOCUMENTS INCORPORATED BY REFERENCE


Part III    Owens-Illinois, Inc. Proxy Statement for The Annual Meeting of 
            Share Owners To Be Held Wednesday, May 13, 1998 ("Proxy Statement").
















                           (Cover page 2 of 2 pages)

<PAGE>
                                 TABLE OF CONTENTS
                                 -----------------

      PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
            ITEM 1.     BUSINESS . . . . . . . . . . . . . . . . . . . . .   1
            ITEM 2.     PROPERTIES . . . . . . . . . . . . . . . . . . . .  12
            ITEM 3.     LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . .  13
            ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                        HOLDERS. . . . . . . . . . . . . . . . . . . . . .  13
                        EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . .  14
      PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
            ITEM 5.     MARKET FOR OWENS-ILLINOIS, INC.'S COMMON STOCK 
                        AND RELATED SHARE OWNER MATTERS. . . . . . . . . .  17
            ITEM 6.     SELECTED FINANCIAL DATA. . . . . . . . . . . . . .  18
            ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                        FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . .  22
            ITEM 7.(a).      QUALITATIVE AND QUANTITATIVE DISCLOSURES 
                             ABOUT MARKET RISK . . . . . . . . . . . . . .  28
            ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  . . .  31
            ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                        ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . .  69
      PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
            ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE
                        REGISTRANT . . . . . . . . . . . . . . . . . . . .  70
            ITEMS 11.   EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS
            and 13.     AND RELATED TRANSACTIONS . . . . . . . . . . . . .  70
            ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                        AND MANAGEMENT . . . . . . . . . . . . . . . . . .  70
      PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
            ITEM 14.(a).     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. .  71
            ITEM 14.(b).     REPORTS ON FORM 8-K . . . . . . . . . . . . .  76
      SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
      SCHEDULES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   S-1
      EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1





















<PAGE>

                                    PART I


ITEM 1.     BUSINESS

General Development of Business

Owens-Illinois, Inc. (the "Company"), through its subsidiaries, is the
successor to a business established in 1903.  The Company is one of the
world's leading manufacturers of packaging products.  Approximately one of
every two glass containers made worldwide is made by the Company, its
affiliates or licensees.  In addition to being the largest manufacturer of
glass containers in the United States, North America, South America and India,
and the second largest in Europe, the Company is a leading manufacturer in the
United States of plastic containers, plastic closures, plastic prescription
containers, labels, and multipack plastic carriers for beverage containers.
Since 1992, through acquisitions and investments strategic to its core
businesses, the Company has furthered its market leadership position in the
geographic areas in which it competes.  During the years 1993 through 1997,
the Company has invested more than $1.5 billion in capital expenditures 
(excluding acquisition expenditures) to improve productivity and increase
capacity in key locations.

In February 1997, the Company completed the acquisition of 79% of AVIR S.p.A.
("AVIR"), the largest manufacturer of glass containers in Italy and the Czech
Republic, and the fourth largest in Spain.  In addition to purchasing this
controlling interest pursuant to an acquisition agreement, the Company
acquired an additional 20% interest through public tender offers completed
during the second half of 1997.  Total purchase cost for AVIR was
approximately $586 million.  AVIR has 15 manufacturing facilities throughout
Italy and two manufacturing facilities in each of the Czech Republic and
Spain.  The AVIR operations contributed over $500 million to 1997 consolidated
sales.

Also in February 1997, the Company acquired certain assets of one of its major
competitors in the U.S. glass container segment of the rigid packaging
industry, Anchor Glass Container Corporation, which had filed for protection
under Chapter 11 of the United States Bankruptcy Code.  The assets acquired
included two glass container manufacturing facilities and the assumption of
contractual agreements with a major U.S. brewer, including a partnership
interest in a glass container manufacturing facility ("the Anchor Assets"). 
The Company acquired the Anchor Assets for approximately $125 million plus the
assumption of certain liabilities.

During the second quarter of 1997, the Company implemented a refinancing plan
(the "Refinancing Plan") designed to reduce interest expense, reduce the
amount of long-term debt, and improve financial flexibility.  The Refinancing
Plan, which was completed on October 15, 1997, included a $1.2 billion
increase in the borrowing capacity under the Company's bank credit agreement
to a total of $3.0 billion, the sale of 16,936,100 shares of common stock, par
value $.01 per share, for net proceeds of $464.2 million, the issuance of $600
million of senior notes at an average interest rate of approximately 8%, and
the retirement of approximately $1.9 billion of higher cost debt.  The sale of

                                      1

<PAGE>
the shares of common stock and the issuance of the senior notes were made
pursuant to public offerings.

On March 1, 1998, the Company signed a definitive agreement to acquire the
worldwide glass and plastic packaging businesses of BTR Plc ("BTR") in an all
cash transaction valued at approximately $3.6 billion (the "BTR Acquisition"). 
The BTR Acquisition is subject to the approval of BTR's shareholders and
regulatory approvals.  Although there can be no assurance of these approvals,
the Company believes that the approvals will be obtained and that the BTR
Acquisition will close in the second quarter of 1998.

The Company has secured commitments from certain banks participating in its
current bank credit agreement to provide financing to consummate the BTR
Acquisition.  Following the closing, the Company plans to refinance a portion
of the bank borrowings with public offerings of debt and equity securities. 
On March 6, 1998, the Company filed a universal shelf registration statement
with the Securities and Exchange Commission for offerings of up to $4.0
billion of debt securities, preferred stock, common stock, or some combination
thereof from time to time as market conditions permit.

BTR's glass packaging unit is the leading glass container manufacturer in
Australia and New Zealand, a leading supplier in the United Kingdom and
participates in joint ventures in China and Indonesia.  The Company has
provided technology and equipment to BTR's glass container operations since
1967 and to certain BTR plastics businesses under a series of technical
assistance agreements.

In plastics, BTR is a leading supplier of polyethylene terephthalate (PET) hot
fill food and drink containers, with operations in the United States,
Australia, New Zealand, the United Kingdom, the Netherlands, and in emerging
markets in such areas as Brazil, China, Hungary, Mexico and Saudi Arabia
through its Continental PET Technologies unit.  In addition, BTR's ACI
operations in Australia and New Zealand produce a variety of plastic bottles
and closures of high density polyethylene and polypropylene.

Since 1991, excluding the BTR Acquisition, the Company has acquired 10 glass
container companies serving emerging markets and eight plastic packaging
operations.  These acquisitions are consistent with the Company's strategy to
maintain leadership in glass and plastic packaging and to pursue revenue and
earnings growth opportunities around the world.  BTR's worldwide glass and
packaging businesses had 1997 sales of approximately $1.5 billion.

The principal executive office of the Registrant is located at One SeaGate,
Toledo, Ohio 43666; the telephone number is (419) 247-5000.


Financial Information about Industry Segments

Information as to sales, operating profit, and identifiable assets by industry
segment is included on pages 65 - 67.



                                      2

<PAGE>
Narrative Description of Business

The Company has two industry segments: (1) Glass Containers and (2) Plastics
Group.  Below is a description of these segments and information to the extent
material to understanding the Company's business taken as a whole.  


Products and Services, Customers, Markets and Competitive Conditions, and
Methods of Distribution 

GLASS CONTAINERS INDUSTRY SEGMENT

The Company is a leading manufacturer of glass containers throughout the
world.  In addition to being the largest maker of glass containers in the
United States, North America, South America and India, the Company also is a
leading manufacturer of glass packaging in Europe.  Worldwide glass container
sales represented 71%, 66%, and 66%  of the Company's consolidated net sales
for the years ended December 31, 1997, 1996, and 1995, respectively.  The
Company believes that its internally developed machines are significantly more
efficient and productive than those used by its competitors, making it the
low-cost manufacturer and a recognized technological leader in the industry.  

The Company currently has technical assistance agreements with 36 different
companies in 38 countries.  These agreements, which cover areas ranging from
manufacturing and engineering assistance to support in functions such as
marketing, sales, and administration, allow the Company to participate in the
worldwide growth of the glass container industry.  The Company believes these
associations and its technical expertise will afford it opportunities to
participate in the glass business in regions of the world where the Company
does not currently have a presence.  

Products and Services
- ---------------------
Glass containers are produced in a wide range of sizes, shapes and colors for
beer, food, tea, fruit juice, soft drinks, liquor, wine, wine coolers and
pharmaceuticals.  The Company has been a leader in product innovation,
introducing products including long neck nonreturnable beer bottles, and in
developing containers for teas, juices, food, soft drinks and wine coolers.

The Company's product development efforts in glass containers are aimed at
providing custom designed packaging systems to customers and consumers. 
Product lines designed to complement glass containers include product
extensions related to single service packages for teas, juices and soft drinks
and innovative secondary packaging systems such as closures, carriers and
labeled containers.  

Customers
- ---------
Beer, food (which include juices and teas), liquor (i.e. distilled spirits)
and wine producers comprise the majority of industry demand for U.S. glass
containers.  In addition to the just previously mentioned producers,
international glass container customers include soft drink bottlers.  In the

                                      3

<PAGE>
regions where the Company has operations, it has leading positions within
these customer groups, as well as strong positions in smaller customer groups. 
The Company believes its position gives it the ability to sustain market share
and take advantage of new opportunities and areas of growth within each
customer group.

Most glass production is sold to customers under arrangements with terms
varying from several months to several years which specify estimated
quantities to be shipped as a percentage of the customers' total annual
shipment requirements.  Containers are typically scheduled for production in
response to customers' orders for their quarterly requirements.

Markets and Competitive Conditions
- ----------------------------------
Exclusive of the BTR Acquisition expected to close in the second quarter of
1998, the Company has glass container operations located in 18 countries.  The
principal markets for the Company's glass products are in the United States,
Latin America and Europe.  The Company has the leading market share of the
glass segment of United States beer and food (including juices and teas)
packaging.  Excluding E & J Gallo Winery Inc., which manufactures its own
containers, the Company believes it is a leading supplier of glass for wine
and wine coolers.  Internationally, the Company is the leading producer of
glass containers in most of the geographic markets in which it is located.  

The Company's glass products compete on the basis of quality, service and
price with other forms of rigid packaging, principally aluminum and steel cans
and plastic bottles, as well as glass containers produced by other large,
well-established manufacturers.  The principal competitors producing glass
containers within the U.S. market are Ball-Foster Glass Container Co., L.L.C.,
a wholly-owned subsidiary of Paris-based Saint-Gobain ("Ball-Foster"), and
Anchor Glass Container Corporation, most of the assets of which were purchased
by Canadian-based Consumers Packaging, Inc. in early 1997.  The principal
competitor producing glass containers outside the U.S. market is Saint-Gobain. 
The principal competitors producing metal containers are American National Can
Company, Ball Corporation, Crown Cork & Seal Company, Inc., Reynolds Metals
Company, and Silgan Corporation.  In the metal container market, no one
competitor is dominant.  The principal competitors supplying plastic
containers are Continental Plastics Containers, Inc. (a subsidiary of
Continental Can Company, Inc.), Graham Packaging Co., Plastipak Packaging,
Inc., and Silgan Corporation.  In the plastic containers market, no one
competitor is dominant.

Methods of Distribution
- -----------------------
Due to the significance of transportation costs and the importance of timely
delivery, manufacturing facilities are located close to customers.  Most of
the Company's glass container products are shipped by common carrier to
customers within a 250-mile radius of a given production site.  In addition to
glass container manufacturing facilities, the Company operates two sand plants
and three machine shops which manufacture high-productivity glass-making
machines.  


                                      4

<PAGE>
Domestic Glass Operations
- -------------------------
The Company has an approximate 45% share of the glass container category of
the U.S. rigid packaging market.  Domestically, the Company operates 22 glass
container manufacturing facilities, a sand plant and two machine shops which
manufacture high-productivity glass-making machines.  Marketing under the
trade name Owens-Brockway, the Company believes that its 1997 U.S. glass
container sales were significantly higher than the sales of its nearest U.S.
glass container competitor, Ball-Foster.  

Unit shipments in the U.S. to brewers and food producers, including producers
of juices and teas, approximated 90%, 90%, and 87% of the Company's total U.S.
glass container unit shipments for 1997, 1996, and 1995, respectively.

During 1997, total glass container industry shipments within the United States
rigid packaging market were slightly below 1996 shipment levels.  Shipments
declined in 1997 as a result of lower demand for food containers, including
tea and juice bottles, partially offset by increased shipments of beer
containers.  The Company's share of the United States glass container market
increased several percentage points during this time.  

Industry capacity in North America is expected to be aligned more closely with
demand.  During 1997, closings of four U.S. glass container plants and one in
Canada were initiated by companies operating in the U.S. glass container
industry.  Overall, the Company expects glass containers' share of the United
States rigid packaging market to remain relatively stable compared to 1997
levels and that the Company will maintain its share of the glass container
segment due in part to the Company's ongoing improvement in operating
efficiencies and its technological leadership.

The glass container industry in the United States continues to recycle used
glass containers into new glass containers.  The Company is an important part
of this effort and continues to melt substantial tonnage of recycled glass in
its glass furnaces.  The infrastructure for recycling glass also supplies
recycled glass containers to producers other than those in the glass container
industry for use in the manufacture of secondary products (i.e. fiberglass and
roadway material manufacturers).  Glass recycling helps relieve the burden on
the nation's landfills, while significantly reducing the need for virgin
materials.  Recycling also results in energy savings and reductions in air
emissions.  The Company has no technological barriers to using all of the
recycled glass it can reasonably expect to obtain from public/private
collection programs as long as such glass meets incoming material quality
standards.










                                      5

<PAGE>    
International Glass Operations
- ------------------------------
The Company has added to its international operations by acquiring glass
container companies with leading positions in growing or established markets,
increasing capacity at selected foreign affiliates, and maintaining the global
network of glass container companies that license the Company's technology. 
Exclusive of the BTR Acquisition expected to close in the second quarter of
1998, the Company has significant ownership positions in 19 companies located
in 16 foreign countries and Puerto Rico.  Most of the Company's international
glass affiliates are the leading container manufacturers in their respective
countries, producing a full line of containers for the soft drink, beer, wine,
liquor, food, drug and chemical industries.  Some of these companies also
produce molds, mold parts, sand and feldspar, limestone, machines and machine
parts, glass insulators, rolled glass, sheet glass and glass tableware.  The
Company's principal international glass affiliates are located in Latin
America and Europe.

Outside of the United States, unit shipments of glass containers have grown
substantially in recent years.  International glass operations are benefiting
from increased consumer spending power, increased privatization of industry, a
favorable climate for foreign investment, and global expansion programs by
major customers.  The lowering of trade barriers has resulted in healthier
economies, rising standards of living, and growing demand for consumer
products and quality packaging in developing countries.  The increasing demand
for quality packaging products in developing countries, where per capita glass
container consumption is low, but rising, continues to create growth
opportunities.  This is reinforced by the fact that in many developing
countries glass has a significant cost advantage over plastic and metal
containers.  Technologies which have produced productivity improvements in the
Company's United States Glass Container operations are also being applied to
the operations of foreign affiliates.  The Company is continuing to pursue
additional strategic alliances with international partners whose markets are
growing and whose manufacturing operations can be enhanced by the Company's
state-of-the-art technology and equipment, which enables such operations to
improve quality, increase productivity, reduce bottle weights, and decrease
energy consumption.  Revenues generated in countries where the Company does
not have a direct ownership position may also provide a benefit to the Company
in the form of royalties tied to sales volume of the Company's licensees.















                                      6

<PAGE>
The Company's significant ownership positions in international glass
affiliates are summarized below:

                                                              Owens-Illinois
Company/Country                                                 Ownership    
- ---------------                                               --------------
Avirunion, a.s., Czech Republic                                   100.0%
Karhulan Lasi Oy, Finland                                         100.0
Oroshaza Glass Manufacturing and Trading, Kft., Hungary           100.0
AVIR S.p.A., Italy                                                100.0
United Glass Ltd., United Kingdom                                 100.0
Centro Vidriero de Venezuela, C.A., Venezuela                     100.0
Manufacturera de Vidrios Planos, C.A., Venezuela                  100.0
Owens-Illinois de Venezuela, C.A., Venezuela                       92.2
A/S Jarvakandi Klaas, Estonia                                      82.0
Owens-Illinois de Puerto Rico, Puerto Rico                         80.0
Comphania Industrial Sao Paulo e Rio, Brazil                       79.4
Vidrios Industriales, S.A., Peru                                   77.2
Wuhan Owens Glass Container Company, Ltd., China                   70.0
Fabrica Boliviana de Vidrios, S. A., Bolivia                       68.8
Cristaleria del Ecuador, S.A., Ecuador                             66.8
Vidrieria Rovira, S.A., Spain                                      62.4
Cristaleria Peldar, S.A., Colombia                                 57.6
Owens-BILT Limited, India                                          51.0
Huta Szkla Jaroslaw S.A., Poland                                   49.3


As discussed in the section "General Development of Business," on March 1,
1998, the Company signed a definitive agreement to acquire the worldwide glass
and plastic packaging businesses of BTR.  


PLASTICS GROUP INDUSTRY SEGMENT

The Company is a leading plastic container manufacturer in the United States. 
The Company is the market leader in most plastic segments in which it
competes.  Plastic container sales represented 15%, 17%, and 16% of the
Company's consolidated net sales for the years ended December 31, 1997, 1996,
and 1995, respectively.  The Company's Plastics Group segment is comprised of
four business units.

Plastic Containers.  This unit, with 22 factories, manufactures rigid, semi-
rigid, flexible and multi-layer plastic containers for a wide variety of uses,
including household products, personal care products, health care products,
chemicals and automotive products and food.

Closure and Specialty Products.  This unit, with 11 manufacturing facilities,
develops and produces closures and closure systems which incorporate
functional features such as tamper evidence, child resistance and dispensing. 
In addition, this unit's diverse product line includes trigger sprayers,
finger pumps, and lotion pumps, as well as metal closures and finger pumps for
the fragrance and cosmetic industry.  In the United States, the Company has a

                                      7

<PAGE>
sole license for Alcoa's technology for compression molded, tamper evident,
thermoplastic closures.  This unit also manufactures custom injection molded
products, such as deodorant canisters and toothpaste dispensers.

Prescription Products.  The Company's Prescription Products unit manufactures
prescription containers.  These products are sold primarily to drug
wholesalers, major drug chains and the government.  Containers for
prescriptions include plastic and glass ovals, vials, rounds, squares and
ointment jars.  The only other major producer in the plastic containers
segment of prescription drug packaging is Kerr Group, Inc.

Label and Carrier Products.  The broad line of labels produced by this unit
includes polyethylene labels for in-mold labeling (IML) and laminated labels
for beverage containers.  The proprietary Contour-Pak plastic carrier line
for bottles is also produced by this unit.  This carrier line is predominantly
used as six-pack and four-pack carriers for iced teas and other fruit drinks. 

Markets.  Major markets for these units include the household products,
personal care products, health care products, and food and beverage
industries.

The plastic segment of the rigid packaging market is competitive and
fragmented due to generally available technology, low costs of entry and
customer emphasis on low package cost.  A large number of competitors exists
on both a national and regional basis.  The Company competes by emphasizing
total package supply (i.e. bottle, label, and closure system), diversified
market positions, proprietary technology and products, new package
development, and packaging innovation.  The Company is the only producer of
the Contour-Pak carrier.  The market for closures is divided into various
categories in which several suppliers compete for business on the basis of
price and product design.

The Company's strategy has been to compete in the segments of the plastic
packaging market where customers seek to use distinctive packaging to
differentiate their products among a growing array of choices offered to
consumers.  The Company believes it is a leader in technology and development
of custom products and has a leading market position for such products.  The
Company believes its plastic container and closure businesses have a
competitive advantage as a result of one of the shortest new product
development cycles in the industry, enabling the Company to provide superior
service in the service-sensitive custom plastic container market.  The
Company's product innovations in plastic containers and closures include in-
mold labeling for custom molded bottles, Contour-Pak carriers for 4, 6 and 8-
pack applications, multilayer structured bottles containing post consumer
recycled resin, Flex-Band and PlasTop tamper-evident closures, Clic Loc
child-resistant closures and Pharmacy Mate reversible prescription container
closures.  Recycling content legislation, which has been enacted in several
states, requires that a certain specified minimum percentage of recycled
plastic be included in new plastic products.  The Company has met such
legislated standards in part due to its material and multilayer process
technology.  


                                      8

<PAGE>
The Company's Plastics Group segment currently has technical assistance
agreements or cross-licenses with 18 companies in 12 countries.  These
agreements, which cover areas ranging from manufacturing and engineering
assistance to support in functions such as marketing, sales, and
administration, allow the Company to participate in the worldwide growth of
the plastic packaging industry.

As discussed in the section "General Development of Business," on March 1,
1998, the Company signed a definitive agreement to acquire the worldwide glass
and plastic packaging businesses of BTR.  

ADDITIONAL INFORMATION

New Products

New products and numerous refinements of existing products are developed and
introduced in each segment every year.  No single new product or refinement,
or group of new products and refinements, have been recently introduced or are
scheduled for introduction which required the investment of a material amount
of the Company's assets or which otherwise would be considered material.

Sources and Availability of Raw Materials

All of the raw materials the Company uses have historically been available in
adequate supply from multiple sources.  However, for certain raw materials,
there may be temporary shortages due to weather or other factors, including
disruptions in supply caused by raw material transportation or production
delays; such shortages are not expected to have a material effect on the
Company's operations.

Patents and Licenses

The Company has a large number of patents which relate to a wide variety of
products and processes, has pending a substantial number of patent
applications, and is licensed under several patents of others.  While in the
aggregate its patents are of material importance to its business, the Company
does not consider that any patent or group of patents relating to a particular
product or process is of material importance when judged from the standpoint
of any segment or its business as a whole.

Seasonality

Sales of particular products of the Glass Containers and Plastics Group
business segments such as beer and certain food containers are seasonal, with
shipments typically greater in the second and third quarters of the year.  








                                      9

<PAGE>
Working Capital

In general, the working capital practices followed by the Company are typical
of the businesses in which it operates.  During the first and second quarters
of the year the accumulation of inventories of certain products in advance of
expected shipments reflects the seasonal nature of those businesses and may
require periodic borrowings.

Customers

Major customers exist for each of the Company's industry segments, and in each
industry segment the loss of a few of these customers might have a material
adverse effect on the segment.  Major customers of the Company include such
companies as Anheuser-Busch Companies, Inc., Philip Morris Companies Inc., The
Procter & Gamble Company, Unilever, N.V. and other leading companies which
manufacture and market a variety of consumer products.

Research and Development

Research and development constitutes an important part of the Company's
activities.  Research and development expenditures were $28.9 million, $31.1
million, and $30.3 million, for 1997, 1996, and 1995, respectively.  Operating
engineering expenditures were $29.9 million, $25.6 million, and $24.5 million
for 1997, 1996, and 1995, respectively.  In addition to new product
development, substantial portions of the technical effort are devoted to
increased process control, automatic inspection, and automation.  No material
amount of money was spent on customer-sponsored research activities during
1997, 1996, or 1995.

Environment

The Company's operations, in common with those of the industry generally, are
subject to numerous existing and proposed laws and governmental regulations
designed to protect the environment, particularly regarding plant wastes and
emissions and solid waste disposal.  Capital expenditures for property, plant,
and equipment for environmental control activities were not material during
1997.

A number of states have enacted, or are considering, legislation to promote
curbside recycling and recycled content legislation as alternatives to
mandatory deposit laws.  Although such legislation is not uniformly developed,
the Company believes that states will continue to enact and develop curbside
recycling and recycling content legislation.

Sales of non-refillable glass beverage bottles and other convenience packages
are affected by mandatory deposit laws and other types of restrictive
legislation.  As of January 1, 1998, there are nine states with mandatory
deposit laws in effect.





                                      10

<PAGE>
Plastic containers have also been the subject of legislation in various
states.  The Company utilizes recycled plastic resin in its manufacturing
processes.  During 1997 and 1996, many plastic containers for products other
than food, drugs, and cosmetics contained 25% post consumer resin.  The
Company believes it is a industry leader in such technology.

Although the Company is unable to predict what legislation or regulations may
be adopted in the future with respect to environmental protection and waste
disposal, compliance with existing legislation and regulations has not had,
and is not expected to have, a material adverse effect on its capital
expenditures, results of operations, or competitive position.

Number of Employees

The Company's operations employed approximately 32,400 persons at December 31,
1997.  A majority of these employees are hourly workers covered by collective
bargaining agreements, the principal one of which was renewed early in 1996
for three years.  The Company considers its employee relations to be good. 
The Company has not had any material labor disputes in the last five years,
and does not anticipate any material work stoppages in the near term.

Financial Information about Foreign and Domestic Operations and Export Sales

Information as to net sales, operating profit, and identifiable assets of the
Company's operating and geographic segments is included on pages 65 - 67. 
Export sales, in the aggregate or by geographic area, were not material for
the years 1997, 1996, or 1995.


























                                      11

<PAGE>

I
TEM 2.  PROPERTIES

The principal manufacturing facilities and other material important physical
properties of the continuing operations of the Company at December 31, 1997
are listed below and grouped by industry segment.  All properties shown are
owned in fee except where otherwise noted.   

Glass Containers (3)                          Napoli, Italy
  Glass Container Plants                      Pordenone, Italy
    Atlanta, GA                               Rome, Italy
    Auburn, NY                                Terni, Italy
    Brockway, PA                              Trento, Italy
    Charlotte, MI                             Treviso, Italy
    Chicago Heights, IL (1)                   Varese, Italy
    Clarion, PA (1)                           Callao, Peru
    Crenshaw, PA                              Jaroslaw, Poland
    Danville, VA                              Vega Alta, Puerto Rico
    Hayward, CA                               Barcelona, Spain (2 plants)
    Lakeland, FL                              St. Albans, United Kingdom
    Lapel, IN                                 Alloa, United Kingdom
    Los Angeles, CA                           Harlow, United Kingdom
    Muskogee, OK (1)                          Peasley, United Kingdom
    Oakland, CA                               Caracas, Venezuela
    Portland, OR                              Guarenas, Venezuela
    Streator, IL                              Valencia, Venezuela
    Toano, VA                                 Valera, Venezuela
    Tracy, CA
    Volney, NY                              Flat Glass Plant
    Waco, TX                                  La Victoria, Venezuela
    Winston-Salem, NC
    Zanesville, OH                          Insulator Plant
    La Paz, Bolivia                           Alessandria, Italy
    Rio de Janeiro, Brazil
    Sao Paulo, Brazil                       Machine Shops
    Wuhan, China                              Brockway, PA
    Envigado, Colombia                        Godfrey, IL
    Zipaquira, Colombia                       Manaus, Brazil
    Sokolov, Czech Republic
    Teplice, Czech Republic                 Mold Shop
    Guayaquil, Ecuador                        Napoli, Italy
    Jarvakandi, Estonia
    Karhula, Finland                        Sand Plants
    Oroshaza, Hungary                         Ione, CA (2)
    Pondicherry, India                        Devilla, United Kingdom
    Pune, India
    Rishikesh, India                      Plastics Group (3)
    Asti, Italy                             Plastic Container Plants
    Bari, Italy (2 plants)                    Atlanta, GA
    Bologna, Italy                            Baltimore, MD
    Cagliari, Italy                           Belvidere, NJ
    Milan, Italy                              Charlotte, NC


                                      12

<PAGE>
    Chicago, IL                             Closure & Specialty Products Plants 
    Cincinnati, OH (1)                        Bridgeport, CT
    Edison, NJ                                Brookville, PA
    Findlay, OH                               Chattanooga, TN
    Florence, KY (1)                          Constantine, MI (1)
    Greenville, SC                            El Paso, TX (2)
    Harrisonburg, VA                          Erie, PA
    Kansas City, MO (2)                       Franklin, IN
    La Mirada, CA (2)                         Hamlet, NC
    Nashua, NH                                Maumee, OH (2)
    Newburyport, MA                           Waterbury, CT
    Rossville, GA (2)                         Las Piedras, Puerto Rico
    St. Louis, MO (2)
    Sullivan, IN                            Mold Shop
    Vandalia, IL (1)                          Kansas City, MO (2)
    Washington, NJ (2)
    Ryttyla, Finland                      Corporate Facilities
    Mexico City, Mexico                     World Headquarters Building
                                            Toledo, OH (2)
  Prescription Products Plant
    Berlin, OH (1)                          Levis Development Park
                                            Perrysburg, OH
  Label and Carrier Products Plant
    Bardstown, KY (1)

- --------------
(1)  This facility is financed in whole or in part under tax-exempt financing
     agreements.
(2)  This facility is leased in whole or in part.
(3)  Excludes facilities associated with the pending BTR Acquisition discussed
     on page 2.


The Company believes that its facilities are well maintained and currently
adequate for its planned production requirements over the next three to five
years.



ITEM 3.     LEGAL PROCEEDINGS

See the second through last paragraphs of the section entitled "Contingencies"
on pages 59 - 63.
            


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

No matter was submitted to a vote of security holders during the last quarter
of the fiscal year ended December 31, 1997.





                                      13

<PAGE>
           EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below are the names and the ages, positions, and offices held (as of
the date hereof), and a brief account of the business experience of each
executive officer.  Officers serve at the discretion of the Board of Directors.


Name and Age                                      Position
- ------------                                      --------
Joseph H. Lemieux (67) . . . . .    Chairman since 1991; Chief Executive
                                    Officer since 1990; President and Chief
                                    Operating Officer, 1986-1990; Director
                                    since 1984.  Member of Class III of the
                                    Board of Directors of the Company, with a
                                    term expiring in 2000.

Lee A. Wesselmann (62) . . . . .    Senior Vice President and Chief Financial
                                    Officer since 1988; Secretary, 1988-1990;
                                    Vice President - Finance, 1988; Director
                                    since 1988.  Member of Class I of the
                                    Board of Directors of the Company, with a
                                    term expiring in 1998.

R. Scott Trumbull (49) . . . . .    Executive Vice President, International
                                    Operations since 1993; Vice President and
                                    Director of Corporate Planning, 1992-
                                    1993; Vice President and General Manager
                                    of Plastics and Closure Operations, 1986-
                                    1992.

Thomas L. Young (54) . . . . . .    Executive Vice President, Administration,
                                    General Counsel and Secretary since 1993;
                                    Vice President, General Counsel, General
                                    Manager - Operations Administration and
                                    Secretary, 1992-1993; Vice President,
                                    General Counsel and Secretary, 1990-1992;
                                    Vice President and General Counsel -
                                    Operations, 1988-1990.















                                      14

<PAGE>
Name and Age                                      Position
- ------------                                      --------
John Bachey (49) . . . . . . . .    Vice President and Managing Director of
                                    United Glass since 1997; Vice President
                                    of Glass Container Sales and Marketing,
                                    1996-1997; Vice President and General
                                    Manager, West Coast, 1993-1996.


Russell C. Berkoben (56) . . . .    Vice President and General Manager of
                                    Plastics Group since 1997; Vice President
                                    and General Manager of Plastic Containers
                                    Operations since 1991; Vice President and
                                    Plastic Container Business Unit Manager,
                                    1985-1991.

Larry A. Griffith (52) . . . . .    Vice President of International
                                    Operations since 1997; Vice President and
                                    Chief Information Officer since 1996;
                                    General Manager of Plastic Components
                                    Operations, 1996-1997; Vice President
                                    since 1990; General Manager of Kimble,
                                    1992-1995; Vice President of Corporate
                                    Staff and Director of Corporate Planning,
                                    1988-1990.

John L. Hodges (58). . . . . . .    Vice President and Technical Director
                                    since 1996; Vice President and General
                                    Manager of Glass Container Operations,
                                    1993-1996; Vice President of Glass
                                    Container Sales and Marketing, 1991-1993;
                                    Vice President of Glass Container
                                    Manufacturing, 1984-1991.

W. Bruce Larsen (44) . . . . . .    Vice President since 1997; Vice President
                                    and Director of Manufacturing, Plastic
                                    Containers, since 1993.

Gerald J. Lemieux (40) . . . . .    Vice President and General Manager of
                                    Domestic Glass Container since 1997; Vice
                                    President, Domestic Glass Container
                                    Finance and Administration, 1992-1997.

Michael D. McDaniel (49) . . . .    Vice President and General Manager of
                                    Closure and Specialty Products Operations
                                    since 1991; Vice President and Director
                                    of Manufacturing and Engineering of
                                    Closure Operations, 1990-1991; Vice
                                    President and Manufacturing Manager of
                                    Closure Operations, 1985-1990.



                                      15

<PAGE>
Name and Age                                      Position
- ------------                                      --------
Philip McWeeny (58). . . . . . .    Vice President and General Counsel -
                                    Corporate since 1988.

Robert A. Smith (56) . . . . . .    Vice President of International
                                    Operations since 1997; Vice President of
                                    Glass Container Manufacturing, 1993-1997;
                                    Vice President and General Manager, West
                                    Coast, 1990-1993; Vice President and Area
                                    Manufacturing Manager, 1986-1990.

David G. Van Hooser (51) . . . .    Senior Vice President and Director of
                                    Corporate Strategy since 1996; Vice
                                    President and General Manager of Plastic
                                    Components Operations, 1994-1996; Vice
                                    President, Treasurer and Comptroller,
                                    1990-1994; Vice President and Treasurer,
                                    1988-1990.


































                                      16

<PAGE>

                                   PART II


ITEM 5.     MARKET FOR OWENS-ILLINOIS, INC.'S COMMON STOCK 
            AND RELATED SHARE OWNER MATTERS

The price range for the Company's Common Stock on the New York Stock Exchange,
as reported by National Association of Securities Dealers, was as follows:



                                          1997                    1996       
                                   ------------------      ------------------
                                    High        Low         High        Low  
                                   ------      ------      ------      ------
First Quarter                      27-1/8      21-1/2      17-1/8      13 5/8
Second Quarter                     34          23-3/8      16-3/4      15-1/8
Third Quarter                      37-1/8      29-5/8      17-1/2      15-1/4
Fourth Quarter                     38-3/8      29-3/4      22-3/4      15-1/4


On December 31, 1997, there were 1,133 common share owners of record.  No
dividends have been declared or paid since the Company's initial public
offering in December 1991.  For restrictions on payment of dividends on Common
Stock, see the third paragraph of the section entitled "Long-Term Debt" on
page 47.




























                                      17

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The selected consolidated financial data presented below relates to each of
the five years in the period ended December 31, 1997.  Such data was derived
from the Consolidated Financial Statements, of which the most recent three
years are included elsewhere in this document and were audited by Ernst &
Young LLP, independent auditors, whose report with respect to the financial
statements appears elsewhere in this document.  See Consolidated Financial
Statements -- Statement of Significant Accounting Policies and Financial
Review.
                                       Years Ended December 31,             
                        ----------------------------------------------------
                        1997 (a)     1996       1995       1994       1993  
                        --------   --------   --------   --------   --------
Consolidated operating             (Dollar amounts in millions)
  results:         . 
Net sales. . . . . .    $4,658.5   $3,845.7   $3,763.2   $3,567.3   $3,535.0
Other (b). . . . . .       169.9      130.5      117.8       85.6      127.1
                        --------   --------   --------   --------   --------
                         4,828.4    3,976.2    3,881.0    3,652.9    3,662.1

Costs and expenses:
Manufacturing, shipping
  and delivery . . .     3,666.4    3,025.6    2,948.5    2,824.3    2,823.8
Research, engineering,
  selling, administra-
  tive and other (c)       407.0      323.9      322.9      379.1      842.8
                        --------   --------   --------   --------   --------
Earnings (loss) from
  continuing operations
  before interest
  expense and items
  below. . . . . . .       755.0      626.7      609.6      449.5       (4.5)
Interest expense . .       302.7      302.6      299.6      278.2      290.0
                        --------   --------   --------   --------   --------
Earnings (loss) from
  continuing operations
  before items
  below. . . . . . .       452.3      324.1      310.0      171.3     (294.5)
Provision (credit)
  for income taxes .       148.5      104.9      100.8       68.9     (113.1)
Minority share owners'
  interests in
  earnings of
  subsidiaries . . .        31.4       28.1       40.1       24.1       19.4
                        --------   --------   --------   --------   --------
Earnings (loss) from
  continuing operations
  before extraordinary
  items  . . . . . .       272.4      191.1      169.1       78.3     (200.8)
Net earnings of
  discontinued
  operations . . . .                                                     1.4 

                                      18

<PAGE>
SELECTED FINANCIAL DATA -- continued

                                       Years ended December 31,             
                        ----------------------------------------------------
                        1997 (a)     1996       1995       1994       1993  
                        --------   --------   --------   --------   --------
                         (Dollar amounts in millions, except per share data)
Gain on sale of
  discontinued operations,
  net of applicable
  income taxes . . .                                                   217.0 
Extraordinary charges
  from early
  extinguishment of
  debt, net of
  applicable income
  taxes  . . . . . .      (104.5)                                      (12.7) 
                        --------   --------   --------   --------   --------
Net earnings . . . .    $  167.9   $  191.1   $  169.1   $   78.3   $    4.9 
                        ========   ========   ========   ========   ========
Basic earnings (loss) 
  per share of 
  common stock:
  Earnings (loss)
    from continuing
    operations before
    extraordinary
    items. . . . . .    $   2.03   $   1.58   $   1.40   $   0.64   $  (1.70)
  Net earnings of
    discontinued
    operations . . .                                                    0.01 
  Gain on sale
    of discontinued
    operations . . .                                                    1.82 
  Extraordinary charges    (0.78)                                      (0.10)
                        --------   --------   --------   --------   --------
  Net earnings . . .    $   1.25   $   1.58   $   1.40   $   0.64   $   0.03 
                        ========   ========   ========   ========   ========
Weighted average
  shares outstanding
  (in thousands) . .     133,597    120,276    119,343    119,005    118,978
                         =======    =======    =======    =======    =======











                                      19

<PAGE>
SELECTED FINANCIAL DATA -- continued

                                       Years ended December 31,             
                        ----------------------------------------------------
                        1997 (a)     1996       1995       1994       1993  
                        --------   --------   --------   --------   --------
                         (Dollar amounts in millions, except per share data)

Diluted earnings (loss) 
  per share of 
  common stock:
  Earnings (loss)
    from continuing
    operations before
    extraordinary
    items. . . . . .    $   2.01   $   1.55   $   1.37   $   0.64   $  (1.70)
  Net earnings of
    discontinued
    operations . . .                                                    0.01 
  Gain on sale
    of discontinued
    operations . . .                                                    1.82 
  Extraordinary charges    (0.77)                                      (0.10)
                        --------   --------   --------   --------   --------
  Net earnings . . .    $   1.24   $   1.55   $   1.37   $   0.64   $   0.03 
                        ========   ========   ========   ========   ========
Weighted diluted average
  shares (in thousands)  135,676    123,567    123,161    122,863    
                         =======    =======    =======    =======

Options to purchase 11,429, 146,975, 781,290, and 1,022,548 weighted shares of
common stock which were outstanding during 1997, 1996, 1995, and 1994,
respectively, were not included in the computation of diluted earnings per
share because the options' exercise price was greater than the average market
price of the common shares and, therefore, the effect would be antidilutive.

Diluted earnings per share of common stock are equal to basic earnings per
share of common stock for 1993 due to the loss from continuing operations.















                                      20

<PAGE>
SELECTED FINANCIAL DATA -- continued

                                       Years ended December 31,             
                        ----------------------------------------------------
                        1997 (a)     1996       1995       1994       1993  
                        --------   --------   --------   --------   --------
                                    (Dollar amounts in millions)
Other data:
The following are included in the
  results from continuing operations:
  Depreciation . . .    $  283.5   $  219.8   $  188.3   $  183.3   $  180.0
  Amortization of
    excess cost and
    intangibles. . .        55.9       46.8       44.8       45.2       40.8
  Amortization of
    deferred finance
    fees (included
    in interest
    expense) . . . .         4.1        5.0        5.0        5.1       11.5
                        --------   --------   --------   --------   --------
                        $  343.5   $  271.6   $  238.1   $  233.6   $  232.3
                        ========   ========   ========   ========   ========
Balance sheet data (at end of period):
  Working capital. .    $    604   $    380   $    328   $    171   $    234
  Total assets . . .       6,845      6,105      5,439      5,318      4,901
  Total debt . . . .       3,324      3,395      2,833      2,690      2,487
  Share owners' equity     1,342        730        532        376        295 

(a)  Results of operations since January 1997 include the acquisition of AVIR
     S.p.A.  For further information, see Acquisition of AVIR S.p.A., and Pro
     Forma Information - AVIR Acquisition on pages 42 - 43.  Also during 1997,
     the Company implemented a refinancing plan.  See Pro Forma Information -
     Refinancing Plan on pages 43 - 44 for additional information.

(b)  Other revenues in 1997 includes a gain of $16.3 million ($16.3 million
     aftertax) from the sale of the remaining 49% interest in Kimble Glass in
     the first quarter of 1997.  Other revenues in 1993 includes gains of
     $46.1 million ($34.6 million aftertax) from divestitures.    

(c)  In the first quarter of 1997, the Company recorded charges of $14.1
     million ($8.7 million aftertax) principally for guarantees of certain
     lease obligations of a business divested several years ago.  In the
     fourth quarter of 1995, the Company recorded a charge of $40.0 million
     ($24.7 million aftertax) to write down the asbestos insurance asset and a
     net credit of $40.0 million ($24.7 million aftertax) primarily from the
     reduction of previously established restructuring reserves.  In the
     fourth quarter of 1994, the Company recorded a charge of $100.0 million
     ($61.7 million aftertax) to write down the asbestos insurance asset.  In
     the fourth quarter of 1993, the Company recorded charges totaling $578.2
     million ($357.0 million aftertax) principally for estimated uninsured
     future asbestos-related costs and costs associated with its restructuring
     program.

                                      21

<PAGE>

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

Results of Operations

Comparison of 1997 with 1996

For the year ended December 31, 1997, the Company recorded earnings before
extraordinary items of $272.4 million compared to net earnings of $191.1
million for 1996.  Excluding the effects of the 1997 unusual items discussed
below, the Company's 1997 earnings before extraordinary items of $264.8
million increased $73.7 million over 1996 net earnings of $191.1 million.  The
year ended 1997 includes amounts relating to:  (1) the recent acquisition of
AVIR S.p.A. ("AVIR"), the largest manufacturer of glass containers in Italy
and (2) certain assets of Anchor Glass Container Corporation acquired on
February 5, 1997 ("Anchor Assets").  Consolidated segment operating profit,
excluding the 1997 unusual items, was $711.3 million in 1997, an increase of
$122.1 million, or 20.7%, compared to 1996.  The increase reflects higher
operating profit for both the Glass Containers segment and the Plastics Group
segment, along with lower retained costs.  The Company's effective tax rate,
excluding the effect of the gain on the sale of the interest in Kimble Glass
discussed below, increased to 34.1% for 1997 compared with 32.4% for 1996. 
The higher statutory tax rate in Italy was the primary reason for the
increase.  Net earnings of $167.9 million for 1997 reflect $104.5 million of
extraordinary charges from the early extinguishment of debt.

Capsule segment results (in millions of dollars) for 1997 and 1996 are as
follows (a): 
- ----------------------------------------------------------------------------
Net sales to unaffiliated customers                       1997          1996
- ----------------------------------------------------------------------------
Glass Containers                                      $3,528.4      $2,783.3
Plastics Group                                         1,128.6       1,060.7
Other                                                      1.5           1.7
- ----------------------------------------------------------------------------
Consolidated total                                    $4,658.5      $3,845.7
============================================================================

- ----------------------------------------------------------------------------
Operating profit                                          1997          1996
- ----------------------------------------------------------------------------
Glass Containers                                      $  525.2      $  424.5
Plastics Group                                           188.7         172.1
Eliminations and other retained costs (b)                  (.4)         (7.4)
- ----------------------------------------------------------------------------
Consolidated total                                    $  713.5      $  589.2 
============================================================================
(a)  See Segment Information included on pages 65 - 67.

(b)  Operating profit for 1997 includes:  (1) a gain of $16.3 million on the
     sale of the remaining 49% interest in Kimble Glass; and (2) charges of


                                      22

<PAGE>
     $14.1 million principally for the estimated cost of guaranteed lease
     obligations of a previously divested business.  These items were recorded
     in the first quarter of 1997.

Consolidated net sales for 1997 increased $812.8 million, or 21.1%, over the
prior year.  Net sales of the Glass Containers segment increased $745.1
million, or 26.8%, over 1996.  The combined U.S. dollar sales of the segment's
foreign affiliates increased over the prior year, reflecting the recent
acquisition of AVIR (which contributed approximately $524 million to 1997 U.S.
dollar sales), improved pricing in Venezuela and increased unit shipments at
several other affiliates, particularly in Colombia and the United Kingdom. 
Domestically, glass container unit shipments increased over prior year,
reflecting additional business gained through the acquisition of the Anchor
Assets and increased shipments in most end uses.  Net sales of the Plastics
Group segment increased $67.9 million, or 6.4%, over 1996.  Increased ship-
ments of plastic containers for personal care items such as hair care, skin
care, and body wash products, along with increased demand for prescription
containers, contributed to the increase.

Consolidated operating profit for 1997, excluding the 1997 unusual items
discussed below, increased $122.1 million, or 20.7%, to $711.3 million from
1996 operating profit of $589.2 million.  Consolidated operating profit,
exclusive of the 1997 unusual items, was 15.3% of net sales for both 1997 and
1996.  Consolidated operating expense (consisting of selling and administra-
tive, engineering, and research and development expenses) as a percentage of
net sales was 6.3% in 1997 compared to 6.4% in 1996.  The operating profit of
the Glass Containers segment increased $100.7 million to $525.2 million,
compared to $424.5 million in 1996.  The combined U.S. dollar operating profit
of the segment's foreign affiliates increased from 1996.  AVIR contributed
approximately $71 million to 1997 U.S. dollar operating profit.  Improved
results at the segment's affiliates in Venezuela, Colombia, and the United
Kingdom more than offset the effects of reduced export shipments from Hungary
and soft market conditions in Brazil.  Domestically, operating profit of the
Glass Containers segment increased from 1996.  Operating profit for 1997
benefited from increased sales volume in most end uses, along with the
incremental business gained through the acquisition of the Anchor Assets.  The
operating profit of the Plastics Group segment increased $16.6 million, or
9.6%, compared to 1996.  The increase resulted from improved manufacturing
performance and increased unit shipments in most businesses, particularly
plastic containers for personal care items.  Other retained costs, excluding
the 1997 unusual items discussed below, were $2.6 million for 1997 compared to
$7.4 million for 1996, reflecting higher net financial services income.

The 1997 results include the following unusual items:  (1) a gain of $16.3
million ($16.3 million aftertax) on the sale of the Company's remaining 49%
interest in Kimble Glass; and (2) charges of $14.1 million ($8.7 million
aftertax) principally for the estimated cost of guaranteed lease obligations
of a previously divested business.  These items were recorded in the first
quarter of 1997.

Because of historically high rates of inflation in Brazil, the Company has
used the U.S. dollar as the functional currency for translation of its

                                      23

<PAGE>
Brazilian operations.  As a result of recent reductions in the reported
Brazilian inflation rate, the applicable financial accounting standards
require the Company to use the Brazilian currency as the functional currency
beginning in 1998.  The Company believes this change will not have a material
effect on its consolidated financial statements.

Comparison of 1996 with 1995

For the year ended December 31, 1996, the Company recorded net earnings of
$191.1 million, an increase of $22.0 million, or 13.0%, over 1995 net earnings
of $169.1 million.  Consolidated segment operating profit was $589.2 million
in 1996 compared to $565.5 million in 1995.  Excluding the effects of the 1995
unusual items described below, the increase was attributable to the Company's
domestic glass and plastics group operations, which more than offset lower
operating profit for the Company's international glass operations.  Interest
expense, net of interest income, increased $10.4 million due in part to lower
interest income as a result of reduced levels of cash available for temporary
investment.  The decrease in foreign net earnings, particularly for the
Brazilian and Venezuelan subsidiaries, also resulted in a decrease in minority
share owners' interests in earnings of subsidiaries.

Capsule segment results (in millions of dollars) for 1996 and 1995 were as
follows (a): 
- ----------------------------------------------------------------------------
Net sales to unaffiliated customers                       1996          1995
- ----------------------------------------------------------------------------
Glass Containers                                      $2,783.3      $2,744.0
Plastics Group                                         1,060.7       1,017.7
Other                                                      1.7           1.5
- ----------------------------------------------------------------------------
Consolidated total                                    $3,845.7      $3,763.2
============================================================================

- ----------------------------------------------------------------------------
Operating profit                                          1996      1995 (b)
- ----------------------------------------------------------------------------
Glass Containers                                      $  424.5      $  482.7
Plastics Group                                           172.1         137.4
Eliminations and other retained costs                     (7.4)        (54.6)
- ----------------------------------------------------------------------------
Consolidated total                                    $  589.2      $  565.5 
============================================================================
(a)  See Segment Information included on pages 65 - 67.

(b)  Includes a charge of $40.0 million to write down the asbestos insurance
     asset and a net credit of $40.0 million primarily from the reduction of
     previously established restructuring reserves.  These items increased
     (decreased) operating profit as follows:  Glass Containers, $45.1
     million; Plastics Group $(5.1) million; and other retained costs $(40.0)
     million.



                                      24

<PAGE>
Consolidated net sales for 1996 increased $82.5 million, or 2.2%, over the
prior year.  Net sales of the Glass Containers segment increased $39.3
million, or 1.4%, over 1995.  The combined U.S. dollar sales of the segment's
foreign affiliates increased over the prior year, reflecting higher unit
shipments by several of the foreign affiliates.  The inclusion of glass
container operations in Hungary, Finland, and Estonia, acquired in late 1995,
more than offset lower unit shipments in Brazil, Venezuela and India and the
effects of devaluations of the Venezuelan currency in late 1995 and early
1996.  Domestically, glass container unit shipments were slightly below prior
year levels due in part to the absence in 1996 of sales of soft drink bottles
as a result of the conversion from glass to plastic containers.  For the
Company, this conversion is completed but has affected 1996 comparisons to
prior year periods.  As a result of obtaining additional business and
increased consumer demand for premium and specialty beers, the increase in
shipments to U.S. brewers more than offset the lower shipments of food
containers, including iced tea and juice bottles.  In the Plastics Group
segment, sales increased by $43.0 million, or 4.2%, over 1995.  Higher unit
shipments of compression-molded and dispensing closures, plastic containers,
especially containers used for personal care and health care products, along
with the reported sales of the plastic container operations in Finland,
acquired in late 1995, contributed to the increase.  Partially offsetting were
the effects of lower resin prices on pass-through arrangements with customers.

Consolidated operating profit for 1996 increased $23.7 million, or 4.2%, to
$589.2 million from 1995 operating profit of $565.5 million.  Consolidated
operating profit was 15.3% of net sales in 1996 compared to 15.0% in 1995. 
Consolidated operating expense as a percentage of net sales was 6.4% in both
1996 and 1995.  Operating profit of the Glass Containers segment was $424.5
million, a decrease of $13.1 million, or 3.0%, from 1995, excluding the 1995
unusual item discussed below.  Domestically, operating profit increased over
1995 as a result of an improved cost structure, which more than offset the
effects of inflation and slightly lower unit pricing in some product lines. 
Internationally, record results were achieved in the United Kingdom and
Poland, and positive contributions were reported from the recently acquired
glass container operations in Hungary, Finland and Estonia.  Despite this,
however, U.S. dollar operating profit for the international operations was
lower in 1996 compared to 1995 due to soft market conditions in Brazil and
Venezuela and currency devaluations in Venezuela in late 1995 and early 1996. 
Operating profit of the Plastics Group segment was $172.1 million, an increase
of $29.6 million, or 20.8%, from 1995, excluding the 1995 unusual item
discussed below.  The majority of the increase resulted from higher unit
shipments in most businesses.  Additionally, improved manufacturing
performance, the restructuring of the labels and carriers business, and a
consolidation of manufacturing capacity in the specialty products business
contributed to the increase.  Other retained costs were $7.4 million in 1996
compared to $14.6 million in 1995, excluding the 1995 unusual item discussed
below, reflecting higher net financial services income.

In December 1995, the Company reached settlements involving all remaining
insurance coverage limits (81% of original limits) in the asbestos-related
litigation.  As a result of the settlement agreements, the Company recorded a
charge of $40.0 million ($24.7 million aftertax) in the fourth quarter of 1995

                                      25

<PAGE>
to write down the asbestos insurance asset to the approximate coverage amounts
expected to be received.  For additional information, see Capital Resources
and Liquidity below and Contingencies on pages 59 - 63.

In the fourth quarter of 1995, the Company also recorded an unusual net credit
of $40.0 million ($24.7 million aftertax), related primarily to the reduction
of previously established restructuring reserves.  Included in the net credit
of $40.0 million is a charge of $5.1 million for the restructuring of the
Company's labels and carriers business.

Capital Resources and Liquidity

The Company's total debt at December 31, 1997, was $3.32 billion compared to
$3.39 billion at December 31, 1996.  

At December 31, 1997, the Company had available credit totaling $3 billion
under an agreement with a group of banks ("Bank Credit Agreement"), expiring
in December 2001.  At December 31, 1997, the Company had unused credit
available under the Bank Credit Agreement of $741.0 million.  At December 31,
1996, total commitments under the Company's previous credit facility were $1.8
billion of which $628.7 million of credit had not been utilized.  The
increased utilization of the Bank Credit Agreement resulted in large part from
implementation of the refinancing plan, as discussed in the following
paragraph, and expenditures related to the acquisition of the Anchor Assets. 
Utilization was also higher as a result of borrowings for capital
expenditures, partially offset by proceeds received from the sale of the
Company's remaining 49% interest in Kimble Glass and cash provided by opera-
tions.  Cash provided by operating activities was $445.2 million in 1997
compared to $317.8 million in 1996.  Capital expenditures for property, plant
and equipment were $471.3 million in 1997 and $388.4 million in 1996.

During the second quarter of 1997, the Company filed a universal shelf
registration statement with the Securities and Exchange Commission (the
"Commission") for offerings of up to $2.5 billion of debt securities, common
stock, or both from time to time as market conditions permit.  On May 16,
1997, the Company completed the offerings of:  (1) 14,750,000 shares of common
stock at a public offering price of $28.50 per share; (2) $300 million
aggregate principal amount of 7.85% Senior Notes due May 15, 2004; and (3)
$300 million aggregate principal amount of 8.10% Senior Notes due May 15,
2007.  On May 23, 1997, the Company used the proceeds from these offerings in
addition to borrowings under the Company's Bank Credit Agreement to purchase
$957.4 million aggregate principal amount of the 11% Senior Debentures due
2003, which represents more than 95% of the aggregate principal amount of
these securities outstanding, pursuant to a tender offer and consent solicita-
tion for such securities.  Total consideration for each $1,000 principal
amount of the 11% Senior Debentures redeemed on May 23, 1997 was $1,115.60,
which included a $20 payment for consents to amendments to the related
indenture.  On June 13, 1997, the Company issued an additional 2,186,100
shares of common stock pursuant to the partial exercise of the underwriters'
overallotment option.  On June 16, 1997, the Company redeemed all $250 million
aggregate principal amount of the 10.25% Senior Subordinated Notes due 1999,
at 100% of principal amount, and all $150 million aggregate principal amount

                                      26

<PAGE>
of the 10.50% Senior Subordinated Notes due 2002, at 105.25% of principal
amount.  The June 16, 1997, redemptions were funded by proceeds received from
the June 13, 1997, issuance of common stock and borrowings under the Company's
Bank Credit Agreement.  On August 1, 1997, the Company redeemed all $250
million aggregate principal amount of the 10% Senior Subordinated Notes due
2002, at 105% of principal amount.  On August 15, 1997, the Company redeemed
all $200 million aggregate principal amount of the 9.75% Senior Subordinated
Notes due 2004, at 104.875% of principal amount.  On October 15, 1997, the
Company redeemed all $100 million aggregate principal amount of the 9.95%
Senior Subordinated Notes due 2004, at 104.975% of principal amount.  These
redemptions were funded by borrowings under the Company's Bank Credit
Agreement.  The results of all the above refinancing actions include both a
reduction of indebtedness and lower overall interest rates.  The favorable
effect on annual interest expense amounts to approximately $80 million, based
upon the 1996 pro forma calculations.  See Pro Forma Information - 
Refinancing Plan on pages 43 - 44.

The Company anticipates that cash flow from its operations and from utiliza-
tion of credit available through December 2001 under the Bank Credit Agreement
will be sufficient to fund its operating and seasonal working capital needs,
debt service and other obligations.  The Company faces additional demands upon
its liquidity for asbestos-related payments.  Based on the Company's expecta-
tions regarding favorable trends which should lower its aggregate payments for
lawsuits and claims and its expectation of the collection of its insurance
coverage and reimbursement for such lawsuits and claims, and also based on the
Company's expected operating cash flow, the Company believes that the payment
of any deferred amounts of previously settled or otherwise determined lawsuits
and claims, and the resolution of presently pending and anticipated future
lawsuits and claims associated with asbestos, will not have a material adverse
effect upon the Company's liquidity on a short-term or long-term basis.  

On March 1, 1998, the Company signed a definitive agreement to acquire the
worldwide glass and plastic packaging businesses of BTR Plc ("BTR") in an all
cash transaction valued at approximately $3.6 billion.  The acquisition is
subject to the approval of BTR's shareholders and regulatory approvals.
Although there can be no assurance of these approvals, the Company believes
that the approvals will be obtained and that the acquisition will close in the
second quarter of 1998.  

The Company has secured commitments from certain banks participating in its
Bank Credit Agreement to provide financing to consummate the acquisition. 
Following the closing, the Company plans to refinance a portion of the bank
borrowings with public offerings of debt and equity securities.  On March 6,
1998, the Company filed a universal shelf registration statement with the
Commission for offerings of up to $4.0 billion of debt securities, preferred
stock, common stock, or some combination thereof from time to time as market
conditions permit.  There can be no assurance as to the timing of such
offerings or amount of proceeds which may be raised in connection therewith.





                                      27

<PAGE>
Year 2000

The Company uses a significant number of computer software programs and
operating systems across its entire organization, including applications used
in financial business systems, manufacturing, and various administrative
functions.  To the extent that the Company's software applications contain
source code that is unable to appropriately interpret the upcoming calendar
Year 2000 and beyond, modification or replacement of such applications will be
necessary.  The Company has initiated a review of its computer systems and
programs to identify those that are not Year 2000 compliant.  Key systems and
programs, including those that interact with customers and suppliers, are
being assessed and plans are being developed to address and implement required
system and program modifications by December 31, 1999.  The Company also has
begun to address whether significant customers and suppliers may have Year
2000 compliance issues which will affect their interaction with the Company. 
In addition, following the expected closing of the acquisition of the
worldwide glass and plastic packaging businesses of BTR Plc, as part of its
integration activities the Company intends to extend its assessment of key
systems and programs to those used in the acquired businesses.  The cost of
implementing required system changes is not expected to be material to the
Company's consolidated financial statements.  No assurance can be given,
however, that all of the Company's systems, the systems of acquired
businesses, and those of significant customers and suppliers, will be Year
2000 compliant and that the failure to achieve Year 2000 compliance will not
have a material adverse effect on the Company's operations.

I
TEM 7.(a). QUALITATIVE AND QUANTITATIVE DISCLOSURES 
            ABOUT MARKET RISK

Market risks relating to the Company's operations result primarily from
fluctuations in foreign currency exchange rates and changes in interest rates. 
The Company is not a party to any material derivative financial instruments.

Foreign Currency Exchange Rate Risk

An increasing portion of the Company's operations consists of manufacturing
and sales activities conducted by affiliates in foreign jurisdictions.  The
primary foreign markets served by the Company's affiliates are in Latin
America (principally Colombia, Brazil and Venezuela) and Europe (principally
Italy, the United Kingdom, and Poland).  In general, revenues earned and costs
incurred by the Company's major foreign affiliates are denominated in their
respective local currencies.  Consequently, the Company's reported financial
results could be affected by factors such as changes in foreign currency
exchange rates or highly inflationary economic conditions in the foreign
markets in which the Company's affiliates operate.  When the U.S. dollar
strengthens against foreign currencies, the reported dollar value of local
currency operating profit generally decreases; when the U.S. dollar weakens
against foreign currencies, the reported U.S. dollar value of local currency
operating profit generally increases.

Subject to other business and tax considerations, the Company's strategy is to
mitigate the economic effects of currency exchange rate fluctuations on that

                                      28

<PAGE>
portion of foreign currency operating profit which is expected to be remitted
to the parent company or invested elsewhere.  The Company's foreign affiliates
generally invest their excess funds in U.S. dollars or dollar-based instru-
ments, where such instruments are available with acceptable interest rates and
terms.  In those countries where the local currency is the designated
functional currency, however, this strategy exposes the Company to reported
losses or gains in the event the foreign currency strengthens or weakens
against the U.S. dollar.  The Company believes that the benefit of investing
excess cash in U.S. dollars or their equivalent outweighs the risk of report-
ing losses or gains from currency exchange rate fluctuations.  In those
countries with hyper-inflationary economies, where the U.S. dollar is the
designated functional currency, this investment strategy for excess funds
mitigates the risk of reported losses or gains.

Because most of the Company's foreign affiliates operate within their local
economic environment, the Company believes it is appropriate to finance those
operations with local currency borrowings to the extent practicable.  Consid-
erations which influence the amount of such borrowings include long- and
short-term business plans, tax implications, and the availability of borrow-
ings with acceptable interest rates and terms.  In those countries where the
local currency is the designated functional currency, this strategy mitigates
the risk of reported losses or gains in the event the foreign currency
strengthens or weakens against the U.S. dollar.  In those countries where the
U.S. dollar is the designated functional currency, however, local currency
borrowings expose the Company to reported losses or gains in the event the
foreign currency strengthens or weakens against the U.S. dollar.  As of
December 31, 1997, the portion of the Company's consolidated debt which was
denominated in a foreign currency was not significant.

The Company believes it does not have material foreign currency exchange rate
risk related to the financial instruments (i.e. cash, short-term investments,
and long-term debt) of its foreign affiliates.

Interest Rate Risk

The Company's interest expense is most sensitive to changes in the general
level of U.S. interest rates applicable to its U.S. dollar indebtedness.  To
mitigate the impact of fluctuations in variable interest rates, the Company
could, at its option, convert to fixed interest rates by either refinancing
variable rate debt with fixed rate debt or entering into interest rate swaps.













                                      29

<PAGE>

The following table provides information about the Company's significant
interest rate risk at December 31, 1997:
- ----------------------------------------------------------------------------
                                                 Outstanding      Fair Value
- ----------------------------------------------------------------------------
                                                    (Millions of dollars)
Variable rate debt:
  Bank Credit Agreement, matures December 2001,
    interest at a Eurodollar based rate 
    plus .425%                                      $2,175.0        $2,175.0

Fixed rate debt:
  Senior Notes:
    Due May 2004, interest at 7.85%                 $  300.0        $  312.7
    Due May 2007, interest at 8.10%                 $  300.0        $  319.4
- ----------------------------------------------------------------------------




































                                      30

<PAGE>

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                          Page
                                                                          ----

Report of Independent Auditors                                              32

Consolidated Balance Sheets at December 31, 1997 and 1996                34-35

For the years ended December 31, 1997, 1996, and 1995:

            Consolidated Results of Operations                              33
            Consolidated Share Owners' Equity                               36
            Consolidated Cash Flows                                         37

Statement of Significant Accounting Policies                             38-40

Financial Review                                                         41-67

Selected Quarterly Financial Data                                        68-69


































                                      31

<PAGE>
===============================================================================

                        REPORT OF INDEPENDENT AUDITORS
===============================================================================


The Board of Directors and Share Owners
Owens-Illinois, Inc.

We have audited the accompanying consolidated balance sheets of Owens-
Illinois, Inc. as of December 31, 1997 and 1996, and the related consolidated
statements of results of operations, share owners' equity, and cash flows for
each of the three years in the period ended December 31, 1997.  Our audits
also included the financial statement schedule listed in the Index at Item
14.(a).  These financial statements and schedule are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing stan-
dards.  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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Owens-Illinois,
Inc. at December 31, 1997 and 1996, and the consolidated results of its
operations and its 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, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.





                                                   /s/ Ernst & Young LLP
                                                   ---------------------
                                                   Ernst & Young LLP   

Toledo, Ohio
February 3, 1998

except for information in the section
entitled "Subsequent Event" on page 63,
as to which the date is
March 6, 1998


                                      32

<PAGE>
===========================================================================
CONSOLIDATED RESULTS OF OPERATIONS  Owens-Illinois, Inc.
Millions of dollars, except per share amounts
Years ended December 31,                       1997        1996        1995
- ---------------------------------------------------------------------------
Revenues:
  Net sales                                $4,658.5    $3,845.7    $3,763.2
  Royalties and net technical assistance       21.6        23.6        26.8
  Equity earnings                              17.9        15.2        14.4
  Interest                                     23.6        22.3        29.7
  Other                                       106.8        69.4        46.9
- ---------------------------------------------------------------------------
                                            4,828.4     3,976.2     3,881.0
Costs and expenses:
  Manufacturing, shipping, and delivery     3,666.4     3,025.6     2,948.5
  Research and development                     28.9        31.1        30.3
  Engineering                                  29.9        25.6        24.5
  Selling and administrative                  232.8       188.6       187.8
  Interest                                    302.7       302.6       299.6
  Other                                       115.4        78.6        80.3
- ---------------------------------------------------------------------------
                                            4,376.1     3,652.1     3,571.0
- ---------------------------------------------------------------------------
Earnings before items below                   452.3       324.1       310.0 
Provision for income taxes                    148.5       104.9       100.8 
- ---------------------------------------------------------------------------
                                              303.8       219.2       209.2 
Minority share owners' interests
  in earnings of subsidiaries                  31.4        28.1        40.1
- ---------------------------------------------------------------------------
Earnings before extraordinary items           272.4       191.1       169.1
Extraordinary charges from early 
  extinguishment of debt, net of 
  applicable income taxes                    (104.5)                       
- ---------------------------------------------------------------------------
Net earnings                               $  167.9    $  191.1    $  169.1
===========================================================================
Basic earnings per share of common stock:
  Earnings before extraordinary items      $   2.03    $   1.58    $   1.40
  Extraordinary charges                       (0.78)                       
- ---------------------------------------------------------------------------
  Net earnings                             $   1.25    $   1.58    $   1.40
===========================================================================
Diluted earnings per share of common stock:
  Earnings before extraordinary items      $   2.01    $   1.55    $   1.37
  Extraordinary charges                       (0.77)                       
- ---------------------------------------------------------------------------
  Net earnings                             $   1.24    $   1.55    $   1.37
===========================================================================
See accompanying Statement of Significant Accounting Policies and Financial
Review.


                                      33

<PAGE>         
=============================================================================
CONSOLIDATED BALANCE SHEETS  Owens-Illinois, Inc. 
Millions of dollars, except share amounts
December 31,                                                1997         1996
- -----------------------------------------------------------------------------
Assets
Current assets:
  Cash, including time deposits of $101.6 
    ($97.9 in 1996)                                     $  218.2     $  160.9
  Short-term investments                                    16.1         14.4
  Receivables, less allowances of $52.9                 
    ($40.6 in 1996) for losses and discounts               681.6        488.8
  Inventories                                              592.4        494.6
  Prepaid expenses                                         140.0        126.4
- -----------------------------------------------------------------------------
    Total current assets                                 1,648.3      1,285.1

Investments and other assets:
  Investments and advances                                  87.7         85.6
  Repair parts inventories                                 227.2        189.4
  Prepaid pension                                          635.3        624.5
  Insurance for asbestos-related costs                     239.3        271.4
  Deposits, receivables, and other assets                  307.0        704.2
  Excess of purchase cost over net assets
    acquired, net of accumulated amortization 
    of $328.3 ($293.7 in 1996)                           1,294.9      1,003.5
- -----------------------------------------------------------------------------
    Total investments and other assets                   2,791.4      2,878.6

Property, plant, and equipment:
  Land, at cost                                            143.0        103.0
  Buildings and equipment, at cost:
    Buildings and building equipment                       631.7        493.4
    Factory machinery and equipment                      2,964.0      2,624.4
    Transportation, office, and miscellaneous equipment     91.9         83.8
    Construction in progress                               274.5        131.3
- -----------------------------------------------------------------------------
                                                         4,105.1      3,435.9
  Less accumulated depreciation                          1,699.7      1,494.3
- -----------------------------------------------------------------------------
    Net property, plant, and equipment                   2,405.4      1,941.6
- -----------------------------------------------------------------------------
Total assets                                            $6,845.1     $6,105.3
=============================================================================









                                      34

<PAGE>
=============================================================================
CONSOLIDATED BALANCE SHEETS  Owens-Illinois, Inc. (continued)
Millions of dollars, except share amounts
December 31,                                                1997         1996
- -----------------------------------------------------------------------------
Liabilities and Share Owners' Equity
Current liabilities:
  Short-term loans                                      $  106.8     $  106.8
  Accounts payable                                         452.3        318.9
  Salaries and wages                                        86.0         78.8
  U.S. and foreign income taxes                              4.8         12.7
  Current portion of asbestos-related liabilities           85.0        110.0
  Other accrued liabilities                                238.8        243.0
  Long-term debt due within one year                        70.1         34.7
- -----------------------------------------------------------------------------
    Total current liabilities                            1,043.8        904.9 

Long-term debt                                           3,146.7      3,253.2

Deferred taxes                                             229.2        201.2

Nonpension postretirement benefits                         354.8        371.7

Asbestos-related liabilities                                59.1        138.2

Other liabilities                                          423.1        311.7

Commitments and contingencies

Minority share owners' interests                           246.5        194.7

Share owners' equity:
  Preferred stock                                           20.4         21.4
  Common stock, par value $.01 per share, 250,000,000
    shares authorized, 140,526,195 shares outstanding
    (120,446,348 in 1996)                                    1.4          1.2
  Capital in excess of par value                         1,558.4      1,047.6
  Deficit                                                  (90.3)      (258.2)
  Cumulative foreign currency translation adjustment      (148.0)       (82.3)
- -----------------------------------------------------------------------------
    Total share owners' equity                           1,341.9        729.7
- -----------------------------------------------------------------------------
Total liabilities and share owners' equity              $6,845.1     $6,105.3
=============================================================================




See accompanying Statement of Significant Accounting Policies and Financial
Review.



                                      35

<PAGE>
=============================================================================
CONSOLIDATED SHARE OWNERS' EQUITY  Owens-Illinois, Inc.
Millions of dollars
Years ended December 31,                         1997        1996        1995
- -----------------------------------------------------------------------------
Preferred stock
  Balance at beginning of year               $   21.4    $   21.9    $   26.3
  Exchange of preferred stock                     
    for common stock                             (1.0)        (.5)       (4.4)
- -----------------------------------------------------------------------------
    Balance at end of year                       20.4        21.4        21.9
=============================================================================
Common stock                                 
  Balance at beginning of year                    1.2         1.2         1.2 
  Issuance of common stock                         .2
  Exchange of preferred stock
    for common stock                                                         
- -----------------------------------------------------------------------------
    Balance at end of year                        1.4         1.2         1.2
=============================================================================
Capital in excess of par value
  Balance at beginning of year                1,047.6     1,042.8     1,034.6
  Issuance of common stock                      509.8         4.3         3.8
  Exchange of preferred stock
    for common stock                              1.0          .5         4.4
- -----------------------------------------------------------------------------
    Balance at end of year                    1,558.4     1,047.6     1,042.8
=============================================================================
Deficit
  Balance at beginning of year                 (258.2)     (449.3)     (618.4)
  Net earnings                                  167.9       191.1       169.1 
- -----------------------------------------------------------------------------
    Balance at end of year                      (90.3)     (258.2)     (449.3)
=============================================================================
Cumulative foreign currency 
  translation adjustment
  Balance at beginning of year                  (82.3)      (84.7)      (67.8)
  Net change for the year                       (65.7)        2.4       (16.9)
- -----------------------------------------------------------------------------
    Balance at end of year                     (148.0)      (82.3)      (84.7)
=============================================================================
Total share owners' equity                   $1,341.9    $  729.7    $  531.9 
=============================================================================


See accompanying Statement of Significant Accounting Policies and Financial 
Review.






                                      36

<PAGE>
=============================================================================
CONSOLIDATED CASH FLOWS  Owens-Illinois, Inc.
Millions of dollars
Years ended December 31,                          1997       1996        1995
- -----------------------------------------------------------------------------
Operating activities:
  Earnings before extraordinary items        $   272.4    $ 191.1     $ 169.1 
  Non-cash charges (credits):
    Depreciation                                 283.5      219.8       188.3
    Amortization of deferred costs                60.0       51.8        49.8
    Deferred tax provision                        83.9       77.5        48.7 
    Asbestos-related insurance                                           40.0  
    Restructuring and other costs                                       (40.0)
    Other                                        (34.9)     (10.3)      (33.7)
  Dividends from equity affiliates                 4.8        2.7         3.7
  Change in non-current operating assets         (51.8)     (68.2)      (33.4)
  Asbestos-related payments                     (104.1)    (132.2)     (169.0)
  Asbestos-related insurance proceeds             32.1       52.1       106.6
  Reduction of non-current liabilities            (8.9)      (9.3)      (17.5)
  Change in components of working capital        (91.8)     (57.2)      (60.0)
- -----------------------------------------------------------------------------
    Cash provided by operating activities        445.2      317.8       252.6

Investing activities:
  Additions to property, plant and equipment    (471.3)    (388.4)     (283.6)
  Acquisitions, net of cash acquired            (137.1)    (442.9)      (58.8)
  Net cash proceeds from divestitures and other   57.4        9.2         8.1
- -----------------------------------------------------------------------------
    Cash utilized in investing activities       (551.0)    (822.1)     (334.3)

Financing activities:
  Additions to long-term debt                  1,954.1      618.7       164.3
  Repayments of long-term debt                (2,106.4)    (118.7)      (81.8)
  Increase (decrease) in short-term loans         (4.5)      53.6        (5.3)
  Issuance of common stock                       503.8        4.3         3.8
  Payment of finance fees and debt retirement
    costs                                       (164.7)      (2.9)       
  Issuance of subsidiaries' stock                             8.5            
- ----------------------------------------------------------------------------- 
    Cash provided by financing activities        182.3      563.5        81.0 

Effect of exchange rate fluctuations on cash     (19.2)      (7.7)         .7 
- -----------------------------------------------------------------------------
Increase in cash                                  57.3       51.5         0.0 

Cash at beginning of year                        160.9      109.4       109.4
- -----------------------------------------------------------------------------
Cash at end of year                          $   218.2    $ 160.9     $ 109.4
=============================================================================
See accompanying Statement of Significant Accounting Policies and Financial
Review.


                                      37

<PAGE>
==============================================================================
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES                                   
- ------------------------------------------------------------------------------

Basis of Consolidated Statements.  The consolidated financial statements of
Owens-Illinois, Inc. ("Company") include the accounts of its subsidiaries. 
Newly acquired subsidiaries have been included in the consolidated financial
statements from dates of acquisition.  Consolidated foreign subsidiaries are
principally reported on the basis of fiscal years ending November 30.

The Company uses the equity method of accounting for investments in which it
has a significant ownership interest, generally 20% to 50%.  Other investments
are accounted for at cost.

Nature of Operations.  The Company is a leading manufacturer of glass
container and plastic packaging products operating in two industry segments. 
The Company's principal product lines in the Glass Containers industry segment
are glass containers for the food and beverage industries.  Sales of the Glass
Containers industry segment were 76% of the Company's 1997 consolidated sales. 
The Company has glass container operations located in eighteen countries,
while the plastics packaging products operations are predominantly located in
the United States.  The principal markets and operations for the Company's
glass products are in the United States, Latin America and Europe.  The
Company's principal product lines in the Plastics Group industry segment
include plastic containers, plastic closures, plastic prescription containers,
labels, and multipack plastic carriers for beverage containers.  Major markets
for the Company's plastics packaging products include the United States
household products, personal care products, health care products, and food and
beverage industries.  

Use of Estimates.  The preparation of financial statements in conformity with
generally accepted accounting principles requires management of the Company to
make estimates and assumptions that affect certain amounts reported in the
financial statements and accompanying notes.  Actual results may differ from
those estimates, at which time the Company would revise its estimates
accordingly.  For further information on certain of the Company's significant
estimates, see Contingencies on page 59.

Cash.  The Company defines "cash" as cash and time deposits with maturities of
three months or less when purchased.

Fair Values of Financial Instruments.  The carrying amounts reported for cash,
short-term investments and short-term loans approximate fair value.  In
addition, carrying amounts approximate fair value for certain long-term debt
obligations subject to frequently redetermined interest rates.  Fair values
for the Company's significant fixed rate debt obligations are generally based
on published market quotations.  The Company is not a party to any material   
derivative financial instruments.





                                      38

<PAGE>
Inventory Valuation.  The Company uses the last-in, first-out (LIFO) cost
method of inventory valuation for most domestic inventories.  Other
inventories are valued at the lower of standard costs (which approximate
average costs), average costs, or market.  

Excess of Purchase Cost over Net Assets Acquired.  The excess of purchase cost
over net assets acquired is being amortized over 40 years.  The Company
evaluates the recoverability of long-lived assets based on undiscounted
projected cash flows, excluding interest and taxes, when factors indicate that
an impairment may exist.

Property, Plant, and Equipment.  In general, depreciation is computed using
the straight-line method.

Income Taxes on Undistributed Earnings.  In general, the Company plans to
continue to invest in the business the undistributed earnings of foreign
subsidiaries and corporate joint ventures accounted for by the equity method. 
Accordingly, taxes are provided only on that amount of undistributed earnings
in excess of planned reinvestments.  

Foreign Currency Translation.  The assets and liabilities of certain
affiliates and associates are translated at current exchange rates and any
related translation adjustments are recorded directly in share owners' equity. 
Certain of the Company's major affiliates which are located in Brazil,
Venezuela and Poland operate in "highly inflationary" economies.  In such
cases, certain assets of these affiliates are translated at historical
exchange rates and all translation adjustments are reflected in the statements
of Consolidated Results of Operations.

As a result of recent reductions in the reported Brazilian inflation rate,
beginning in 1998 the Company's Brazilian affiliate will no longer be
considered to operate in a "highly inflationary" economy.  The Company
believes this change will not have a material effect on its consolidated
financial statements.

New Accounting Standards.  In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("FAS No. 130"), which is required to be adopted for
fiscal years beginning after December 15, 1997.  FAS No. 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.  The
Company's components of comprehensive income have historically been net
earnings and foreign currency translation adjustments.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("FAS No. 131"), which is effective for
financial statements for periods beginning after December 15, 1997.  FAS No.
131 establishes revised standards for determining an entity's operating



                                      39

<PAGE>
segments and the type and level of financial information to be presented
related to such operating segments.  The impact of FAS No. 131 on the
Company's disclosures of operating segment information has not been
determined.

In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" ("FAS No. 132"), which is effective for
financial statements for fiscal years beginning after December 15, 1997.  FAS
No. 132 establishes revised standards for disclosures about pensions and other
postretirement benefits.  The impact of FAS No. 132 on the Company's
disclosures of pension and other postretirement benefits has not been
determined.








































                                      40

<PAGE>
=============================================================================
FINANCIAL REVIEW
Tabular data in millions of dollars, except share and per share amounts        
- -----------------------------------------------------------------------------

Earnings Per Share.  The following table sets forth the computation of basic
and diluted earnings per share:
- ---------------------------------------------------------------------------
                                          1997           1996          1995
- ---------------------------------------------------------------------------
Numerator:
  Earnings before extraordinary 
    items                               $272.4         $191.1        $169.1
  Preferred stock dividends               (1.5)          (1.5)         (1.8)
- ---------------------------------------------------------------------------
  Numerator for basic earnings per 
    share - income available to common
    share owners                         270.9          189.6         167.4
  Effect of dilutive securities - 
    preferred stock dividends              1.5            1.5           1.8
- ---------------------------------------------------------------------------
    Numerator for diluted earnings per
    share - income available to common
    share owners after assumed 
    exchanges of preferred stock 
    for common stock                    $272.4         $191.1        $169.1
===========================================================================

Denominator:
  Denominator for basic earnings per
    share - weighted average 
    shares                         133,596,755    120,276,223   119,343,048
  Effect of dilutive securities:
    Stock options                    1,131,911      1,608,327     1,345,361
    Exchangeable preferred stock       947,437      1,681,981     2,472,874
- ---------------------------------------------------------------------------
  Dilutive potential common shares   2,079,348      3,290,308     3,818,235
- ---------------------------------------------------------------------------
    Denominator for diluted earnings
    per share - adjusted weighted 
    average shares and assumed 
    exchanges of preferred stock for
    common stock                   135,676,103    123,566,531   123,161,283
===========================================================================

Basic earnings per share                 $2.03          $1.58         $1.40
===========================================================================
Diluted earnings per share               $2.01          $1.55         $1.37
===========================================================================

See "Preferred Stock" footnote for additional information regarding the
exchangeable preferred stock.

                                      41

<PAGE>
Options to purchase 11,429, 146,975, and 781,290 weighted shares of common
stock which were outstanding during 1997, 1996, and 1995, respectively, were
not included in the computation of diluted earnings per share because the
options' exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.

Acquisition of AVIR S.p.A.  At December 31, 1996, deposits, receivables, and
other assets includes approximately $440 million of escrow funding in
connection with the acquisition of AVIR S.p.A. ("AVIR"), the largest
manufacturer of glass containers in Italy.  On February 3, 1997, the Company
completed the acquisition of 79% of AVIR.  In addition to purchasing this
controlling interest pursuant to an acquisition agreement, the Company
acquired an additional 20% interest through public tender offers initiated
during the second half of 1997.  Total purchase cost for the acquisition was
approximately $586 million.  

The acquisition is being accounted for under the purchase method of
accounting.  The total purchase cost of approximately $586 million has been
allocated to the tangible and identifiable intangible assets and liabilities
of AVIR based upon their respective fair values.  The accompanying
Consolidated Results of Operations for the year ended December 31, 1997,
includes eleven months of AVIR operations.

The aggregate purchase cost and its allocation to the assets and liabilities
of AVIR are as follows:

     Cash and short-term investments                                $131.0
     Other net working capital                                        92.3
     Property, plant and equipment                                   359.7
     Other non-current assets                                         59.9
     Excess of purchase cost over net assets acquired                216.7
     ---------------------------------------------------------------------
                                                                     859.6

     Other long-term liabilities                                    (186.1)
     Debt assumed                                                    (87.9)
     ---------------------------------------------------------------------
     Aggregate purchase cost                                        $585.6
     =====================================================================














                                      42

<PAGE>
Pro Forma Information - AVIR Acquisition (unaudited).  Had the acquisition of
AVIR occurred on January 1, 1996, unaudited pro forma consolidated net sales,
net earnings, and net earnings per share of common stock would have been as
follows:

                                             Year ended December 31, 1996
                                        --------------------------------------
                                                      Effect of              
                                           As           AVIR             As   
                                        Reported     Acquisition      Adjusted
                                        --------     -----------      --------
Net sales                               $3,845.7        $594.4        $4,440.1
                                        ========        ======        ========
Net earnings                            $  191.1        $ 15.7        $  206.8
                                        ========        ======        ========
Basic net earnings per share of 
  common stock                          $   1.58                      $   1.71
                                        ========                      ========
Diluted net earnings per share of
  common stock                          $   1.55                      $   1.67
                                        ========                      ========


The pro forma information assumes financing for the acquisition was provided
by additional borrowings under the Company's Bank Credit Agreement.  The pro
forma data does not purport to represent what the results of operations would
actually have been if the AVIR acquisition had in fact occurred on the date
indicated, or to project results of operations for any future period.

Pro Forma Information - Refinancing Plan (unaudited).  During the second
quarter of 1997, the Company implemented a refinancing plan (the "Refinancing
Plan") designed to reduce interest expense, reduce the amount of long-term
debt, and improve financial flexibility.  The Refinancing Plan, which was
completed on October 15, 1997, included a $1.2 billion increase in the
borrowing capacity under the Company's Bank Credit Agreement to a total of
$3.0 billion, the sale of 16,936,100 shares of common stock, par value $.01
per share, for net proceeds of $464.2 million, the issuance of $300 million
aggregate principal amount of 7.85% Senior Notes due May 15, 2004, the
issuance of $300 million aggregate principal amount of 8.10% Senior Notes due
May 15, 2007, and the retirement of approximately $1.9 billion of higher cost
debt.  The sale of the shares of common stock and the issuance of the Senior
Notes were made pursuant to public offerings (the "Offerings").

The following pro forma information gives effect to the various transactions
related to the Refinancing Plan as if they had occurred at the beginning of
the respective periods.







                                      43

<PAGE>
                                          Years ended December 31,           
                             ------------------------------------------------
                                     1997                     1996           
                             --------------------   -------------------------
                                As          As      As Adjusted    As Further
                             Reported    Adjusted    for AVIR       Adjusted 
                             --------    --------   -----------    ----------
Net earnings                   $272.4      $294.5        $206.8        $257.3
                               ======      ======        ======        ======
Basic net earnings per 
  share of common stock         $2.03       $2.09         $1.71         $1.86
                                =====       =====         =====         =====
Basic weighted average shares
  outstanding (thousands)     133,597     139,889       120,276       137,212

Diluted net earnings per 
  share of common stock         $2.01       $2.07         $1.67         $1.83
                                =====       =====         =====         =====
Diluted weighted average 
  shares (thousands)          135,676     141,969       123,567       140,503


The pro forma amounts reflect the elimination of interest expense related to
the indebtedness redeemed, additional interest expense related to the
additional borrowings under the Bank Credit Agreement (using an assumed annual
interest rate of 7.375%), interest on the Senior Notes, and related changes in
amortization of deferred finance fees.  The pro forma reduction in interest
expense for the years ended December 31, 1997 and 1996, was $35.7 million and
$81.8 million, respectively.  The provision for income taxes was adjusted at a
rate of 38.25% for all periods to reflect the reduction in interest expense. 
The weighted average shares have been adjusted to reflect the issuance of 
16,936,100 shares pursuant to the Refinancing Plan.  

The pro forma data does not purport to represent what the results of
operations would actually have been if the Refinancing Plan had actually
occurred on the dates indicated, or to project results of operations for any
future period.
















                                      44

<PAGE>
Changes in Components of Working Capital Related to Operations.  Changes in
the components of working capital related to operations (net of the effects
related to acquisitions and divestitures) were as follows:

- ----------------------------------------------------------------------------
                                                1997        1996        1995
- ----------------------------------------------------------------------------
Decrease (increase) in current assets:
  Short-term investments                      $  1.1      $ 36.7      $ (5.5)
  Receivables                                  (76.2)      (60.8)       21.0   
  Inventories                                   17.9        10.9         8.4 
  Prepaid expenses                               (.2)        1.2        (8.9)
Increase (decrease) in current liabilities:
  Accounts payable and accrued liabilities     (19.7)      (19.7)      (76.6)
  Salaries and wages                            (4.1)       (5.8)         .2 
  U.S. and foreign income taxes                (10.6)      (19.7)        1.4 
- ----------------------------------------------------------------------------
                                              $(91.8)     $(57.2)     $(60.0)
============================================================================

Inventories.  Major classes of inventory are as follows:

- ----------------------------------------------------------------------------
                                                            1997        1996
- ----------------------------------------------------------------------------
Finished goods                                            $447.3      $374.5
Work in process                                              9.4         4.2
Raw materials                                               92.5        81.2
Operating supplies                                          43.2        34.7
- ----------------------------------------------------------------------------
                                                          $592.4      $494.6
============================================================================

If the inventories which are valued on the LIFO method had been valued at
standard or average costs, which approximate current costs, consolidated
inventories would be higher than reported by $21.6 million and $21.7 million
at December 31, 1997 and 1996, respectively.  

Inventories which are valued at the lower of standard costs (which approximate
average costs), average costs, or market at December 31, 1997 and 1996 were
approximately $313.0 million and $210.4 million, respectively.  












                                      45

<PAGE>
Investments.  Investments and advances relate principally to equity
associates.  Summarized information pertaining to the Company's equity
associates follows:

- ----------------------------------------------------------------------------
                                                            1997        1996
- ----------------------------------------------------------------------------
At end of year:
    Equity in undistributed earnings:
      Foreign                                             $ 75.8      $ 65.5
      Domestic                                               2.9        10.9
- ----------------------------------------------------------------------------
        Total                                             $ 78.7      $ 76.4
============================================================================
    Equity in cumulative translation adjustment           $(28.5)     $(25.0)
============================================================================

- ----------------------------------------------------------------------------
                                                      1997     1996     1995
- ----------------------------------------------------------------------------
For the year:
    Equity in earnings:
      Foreign                                        $15.1    $12.7    $10.1
      Domestic                                         2.8      2.5      4.3
- ----------------------------------------------------------------------------
        Total                                        $17.9    $15.2    $14.4
============================================================================
    Dividends received - foreign                     $ 4.8    $ 2.7    $ 3.7
============================================================================

Summarized combined financial information for equity associates is as follows:

- ----------------------------------------------------------------------------
                                                           1997         1996
- ----------------------------------------------------------------------------
At end of year:
  Current assets                                          $300.5      $386.4
  Non-current assets                                       269.7       432.2
- ----------------------------------------------------------------------------
    Total assets                                           570.2       818.6
- ----------------------------------------------------------------------------
  Current liabilities                                      108.2       227.6
  Other liabilities and deferred items                     122.1       289.6
- ----------------------------------------------------------------------------
    Total liabilities and deferred items                   230.3       517.2
- ----------------------------------------------------------------------------
  Net assets                                              $339.9      $301.4
============================================================================





                                      46

<PAGE>
- ----------------------------------------------------------------------------
                                               1997        1996         1995
- ----------------------------------------------------------------------------
For the year:
  Net sales                                  $670.9    $1,075.8     $1,099.0
============================================================================
  Gross profit                               $ 86.0    $  170.0     $  178.4
============================================================================
  Net earnings                               $ 52.8    $   61.2     $   56.0 
============================================================================

Restrictions on Transfer of Assets.  The governments and national banking
systems of certain countries in which the Company has consolidated foreign
affiliates impose various restrictions on the payment of dividends and
transfer of funds out of those countries.  Additionally, provisions of credit
agreements entered into by certain foreign affiliates presently restrict the
payment of dividends.  The estimated U.S. dollar amount of the foreign net
assets included in the Consolidated Balance Sheets that are restricted in some
manner as to transfer to the Company was approximately $185 million at
December 31, 1997.

Long-Term Debt.  The following table summarizes the long-term debt of the
Company at December 31, 1997 and 1996:
- ----------------------------------------------------------------------------
                                                           1997         1996   
- ----------------------------------------------------------------------------
Bank Credit Agreement:
  Revolving Loans                                      $2,125.0     $1,105.0
  Bid Rate Loans                                           50.0             
Senior Notes:
  7.85%, due 2004                                         300.0
  8.10%, due 2007                                         300.0
Senior Debentures, 11%, due 1999 to 2003                   42.6      1,000.0
Senior Subordinated Notes:
  10-1/4%, due 1999                                                    250.0
  10-1/2%, due 2002                                                    150.0
  10%, due 2002                                                        250.0
  9-3/4%, due 2004                                                     200.0
  9.95%, due 2004                                                      100.0
Other                                                     399.2        232.9
- ----------------------------------------------------------------------------
                                                        3,216.8      3,287.9
  Less amounts due within one year                         70.1         34.7
- ----------------------------------------------------------------------------
    Long-term debt                                     $3,146.7     $3,253.2
============================================================================

In May 1997, the Company entered into an agreement with a group of banks
("Bank Credit Agreement" or "Agreement") which provides Revolving Loan
Commitments under which the Company may borrow up to $3.0 billion through
December 31, 2001.  The Agreement includes an Overdraft Account facility
providing for aggregate borrowings up to $50 million which reduce the amount
available for borrowing under the Revolving Loan Commitments.  In addition,

                                      47

<PAGE>
the terms of the Bank Credit Agreement permit the Company to request Bid Rate
Loans from banks participating in the Agreement.  Borrowings outstanding under
Bid Rate Loans are limited to $750 million and reduce the amount available for
borrowing under the Revolving Loan Commitments.  The Revolving Loan
Commitments also provide for the issuance of letters of credit totaling up to
$300 million.

At December 31, 1997, the Company had unused credit available under the Bank
Credit Agreement of $741.0 million.  

Revolving loans bear interest, at the Company's option, at the prime rate or a
Eurodollar based rate plus a margin linked to the Company's Consolidated
Leverage Ratio, as defined in the Agreement.  The margin is currently .425%
and is limited to a range of .275% to .625%.  Overdraft Account loans bear
interest at the prime rate minus the facility fee percentage, defined below. 
The weighted average interest rate on borrowings outstanding under the Bank
Credit Agreement at December 31, 1997, was 6.30%.  While no compensating
balances are required by the Agreement, the Company must pay a facility fee on
the Revolving Loan Commitments.  The facility fee, currently .20%, is limited
to a range of .125% to .375%, based on changes in the Company's Consolidated
Leverage Ratio.  The Agreement requires the maintenance of certain financial
ratios, restricts the creation of liens and incurrence of indebtedness, and
restricts certain types of business activities and investments.

In April 1997, the Company filed a universal shelf registration statement with
the Securities and Exchange Commission for offerings of up to $2.5 billion of
debt securities, common stock, or both from time to time as market conditions
permit.  On May 16, 1997, pursuant to the registration statement, the Company
completed the offerings of:  (1) 14,750,000 shares of common stock at a public
offering price of $28.50 per share; (2) $300 million aggregate principal
amount of 7.85% Senior Notes due May 15, 2004; and (3) $300 million aggregate
principal amount of 8.10% Senior Notes due May 15, 2007.  On May 23, 1997, the
Company used the proceeds from these offerings in addition to borrowings under
the Company's Bank Credit Agreement to purchase $957.4 million aggregate
principal amount of the 11% Senior Debentures due 2003 pursuant to a tender
offer and consent solicitation for such securities.  On June 13, 1997, the
Company issued an additional 2,186,100 shares of common stock pursuant to the
partial exercise of the underwriters' overallotment option.  On June 16, 1997,
the Company redeemed all $250 million aggregate principal amount of the 10.25%
Senior Subordinated Notes due 1999, and all $150 million aggregate principal
amount of the 10.50% Senior Subordinated Notes due 2002.  The June 16, 1997,
redemptions were funded by proceeds received from the June 13, 1997, issuance
of common stock and borrowings under the Company's Bank Credit Agreement.  On
August 1, 1997, the Company redeemed all $250 million aggregate principal
amount of the 10% Senior Subordinated Notes due 2002.  On August 15, 1997, the
Company redeemed all $200 million aggregate principal amount of the 9.75%
Senior Subordinated Notes due 2004.  On October 15, 1997, the Company redeemed
all $100 million aggregate principal amount of 9.95% Senior Subordinated Notes
due 2004.  The August and October redemptions were funded by borrowings under
the Company's Bank Credit Agreement.



                                      48

<PAGE>
As a result of the release of the guarantees and collateral securing the Bank
Credit Agreement and the 11% Senior Debentures, the newly issued Senior Notes
rank pari passu with such obligations.  The Bank Credit Agreement, 11% Senior
Debentures, and Senior Notes are senior in right of payment to all existing
and future subordinated debt of the Company.

Under the terms of the Bank Credit Agreement, dividend payments with respect
to the Company's Preferred or Common Stock and payments for redemption of
shares of its Common Stock are subject to certain limitations.  At 
December 31, 1997, the maximum allowable amount of such payments was $336.2
million.

Annual maturities for all of the Company's long-term debt through 2002 are as
follows:  1998, $70.1 million; 1999, $138.2 million; 2000, $40.4 million;
2001, $2,307.9 million; and 2002, $25.3 million.

Interest paid in cash aggregated $303.8 million for 1997, $281.3 million for
1996, and $283.1 million for 1995.

Fair values at December 31, 1997, of the Company's significant fixed rate debt
obligations are as follows:

- ----------------------------------------------------------------------------
                                                      Indicated
                                      Principal        Market
                                       Amount          Price      Fair Value
- ----------------------------------------------------------------------------
Senior Notes:
  7.85%                                  $300.0        $104.24        $312.7  
  8.10%                                   300.0         106.45         319.4
- ----------------------------------------------------------------------------

Operating Leases.  Rent expense attributable to all operating leases was $57.3
million in 1997, $59.0 million in 1996, and $58.5 million in 1995.  Contingent
rental expense was not significant in any period presented.  Minimum future
rentals under operating leases are as follows:  1998, $27.6 million; 1999,
$24.9 million; 2000, $21.7 million; 2001, $20.5 million; 2002, $19.6 million;
and 2003 and thereafter, $67.4 million.

Foreign Currency Translation.  Aggregate foreign currency exchange gains
(losses) included in other costs and expenses were $(8.1) million in 1997, $.5
million in 1996, and $(10.1) million in 1995, and resulted principally from
translation of the balance sheets of certain of the Company's major affiliates
which are located in Brazil and Venezuela.  Earnings on time deposits and
short-term investments in those countries typically include an inflationary
component, which has substantially offset the exchange losses.







                                      49

<PAGE>
Changes in the cumulative foreign currency translation adjustment were as
follows:

- ----------------------------------------------------------------------------
                                                  1997        1996      1995
- ----------------------------------------------------------------------------
Balance at beginning of year                    $ (82.3)    $(84.7)   $(67.8)
Net effect of exchange rate
  fluctuations                                    (79.6)      (1.1)    (17.2)
Deferred income taxes                              13.9        3.5        .3
- ----------------------------------------------------------------------------
Balance at end of year                          $(148.0)    $(82.3)   $(84.7) 
============================================================================

The net effect of exchange rate fluctuations generally reflects changes in the
relative strength of the U.S. dollar against major foreign currencies between
the beginning and end of the year.    

As a result of recent reductions in the reported Brazilian inflation rate,
beginning in 1998 the Company's Brazilian affiliate will no longer be
considered to operate in a "highly inflationary" economy. The Company believes
this change will not have a material effect on its consolidated financial
statements.

Income Taxes.  Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. 
Significant components of the Company's deferred tax assets and liabilities at
December 31, 1997 and 1996 are as follows:

- ----------------------------------------------------------------------------
                                                           1997         1996
- ----------------------------------------------------------------------------
Deferred tax assets:
  U.S. Federal tax loss carryovers                      $ 164.5      $ 102.6   
  Other accrued liabilities                               132.4        104.1
  Accrued postretirement benefits                         124.2        131.9
  Asbestos-related liabilities                             50.5         86.9
  Other                                                    92.2         68.2
- ----------------------------------------------------------------------------
    Total deferred tax assets                             563.8        493.7

Deferred tax liabilities:
  Property, plant and equipment                           273.9        196.8
  Prepaid pension costs                                   222.3        226.2
  Insurance for asbestos-related costs                     76.3         82.3
  Inventory                                                36.5         32.4
  Receivables and other assets                             19.4         16.9
  Other                                                    46.6         35.9
- ----------------------------------------------------------------------------
    Total deferred tax liabilities                        675.0        590.5
- ----------------------------------------------------------------------------
    Net deferred tax liabilities                        $(111.2)     $ (96.8)
============================================================================

                                      50

<PAGE>
Deferred taxes are included in the Consolidated Balance Sheets at December 31, 
1997 and 1996 as follows:

- ----------------------------------------------------------------------------
                                                           1997         1996
- ----------------------------------------------------------------------------
Prepaid expenses                                        $ 118.0      $ 104.4
Deferred tax liabilities                                 (229.2)      (201.2)
- ----------------------------------------------------------------------------
Net deferred tax liabilities                            $(111.2)     $ (96.8)
============================================================================

The provision for income taxes consists of the following:

- ----------------------------------------------------------------------------
                                                  1997      1996        1995
- ----------------------------------------------------------------------------
Current:
  U.S. federal                                  $  1.0    $  1.5      $  1.5
  State                                            1.0       1.1          .8
  Foreign                                         62.6      24.8        49.8
- ----------------------------------------------------------------------------
                                                  64.6      27.4        52.1
- ----------------------------------------------------------------------------
Deferred:
  U.S. federal                                    65.8      57.9        34.7 
  State                                            7.2       9.2         6.6 
  Foreign                                         10.9      10.4         7.4 
- ----------------------------------------------------------------------------
                                                  83.9      77.5        48.7 
- ----------------------------------------------------------------------------
Total:
  U.S. federal                                    66.8      59.4        36.2 
  State                                            8.2      10.3         7.4 
  Foreign                                         73.5      35.2        57.2
- ----------------------------------------------------------------------------
                                                $148.5    $104.9      $100.8 
============================================================================

The provision for income taxes was calculated based on the following
components of earnings before income taxes:

- ----------------------------------------------------------------------------
                                                  1997      1996        1995
- ----------------------------------------------------------------------------
Domestic                                        $224.5    $160.9      $100.2 
Foreign                                          227.8     163.2       209.8
- ----------------------------------------------------------------------------
                                                $452.3    $324.1      $310.0 
============================================================================



                                      51

<PAGE>
Income taxes paid in cash were as follows:

- ----------------------------------------------------------------------------
                                                  1997      1996        1995
- ----------------------------------------------------------------------------
Domestic                                        $  1.9    $   .5      $  3.1 
Foreign                                           86.0      33.4        35.5
- ----------------------------------------------------------------------------
                                                $ 87.9    $ 33.9      $ 38.6
============================================================================

A reconciliation of the provision for income taxes based on the statutory U.S.
federal tax rate of 35% to the provision for income taxes is as follows:

- ----------------------------------------------------------------------------
                                                  1997      1996        1995 
- ----------------------------------------------------------------------------
Pretax earnings at statutory
  U.S. Federal tax rate                         $158.3    $113.4      $108.5 
Increase (decrease) in provision for
  income taxes due to:
  Amortization of goodwill                        10.6      10.5        10.5   
  State taxes, net of federal benefit              5.3       6.7         4.8 
  Foreign sales corporation and possession
    tax credits                                   (7.3)     (5.9)       (5.3)
  Divestiture                                     (5.7)
  Nontaxable foreign earnings                     (4.8)     (5.4)       (5.3)
  Research and development credits                (1.5)      (.5)       (1.0)
  Foreign earnings at different rates              (.6)     (8.9)       (4.9) 
  Equity earnings                                            (.9)       (2.1)
  Other items                                     (5.8)     (4.1)       (4.4)
- ----------------------------------------------------------------------------
Provision for income taxes                      $148.5    $104.9      $100.8 
============================================================================
Effective tax rate                               32.8%     32.4%       32.5%
============================================================================

For U.S. Federal income tax purposes, approximately $470 million of net
operating loss is available as a carryover at December 31, 1997.  Carryovers
of the net operating loss expire beginning in 2004.  

Alternative minimum tax credits and research and development credits of
approximately $18 million and $5 million, respectively, are available to
offset future U.S. federal income tax.  The alternative minimum tax credits do
not expire while carryovers of the research and development credits expire
beginning in 2009.

At December 31, 1997, the Company's equity in the undistributed earnings of
foreign subsidiaries for which income taxes had not been provided approximated
$418 million.  It is not practicable to estimate the U.S. and foreign tax
which would be payable should these earnings be distributed.  


                                      52

<PAGE>
Preferred Stock.  Preferred shares, $.01 par value, $7.00 cumulative dividend,
issuable in series, at December 31, 1997 and 1996, were as follows:

                                                            Number of Shares 
- -----------------------------------------------------------------------------
                                                             1997        1996
- -----------------------------------------------------------------------------
Series A Exchangeable
   Authorized                                              75,000      75,000
   Issued                                                  65,625      65,625
   Outstanding                                             17,099      17,099
Series B Exchangeable
   Authorized                                              75,000      75,000
   Issued                                                  65,625      65,625
   Outstanding                                             55,665      65,625
Series C Exchangeable
   Authorized                                             150,000     150,000
   Issued and outstanding                                 131,250     131,250

The preferred shares, all of which were issued October 30, 1992, are
exchangeable for a number of common shares determined by multiplying the total
number of exchangeable shares being exchanged by the sum of $100 plus all
dividends accumulated and unpaid on each share being exchanged and dividing
such amount by the last reported sales price of common shares on the New York
Stock Exchange at the close of business on the business day next preceding the
day of exchange.  The shares are exchangeable at the option of the owners as
follows:  Series A, from and after the third anniversary of the date of
issuance; Series B, from and after the fifth anniversary of the date of
issuance; and Series C, from and after the sixth anniversary of the date of
issuance.  Dividends accumulated and unpaid were approximately $7.4 million
and $6.2 million at December 31, 1997 and 1996, respectively.

Holders of the preferred shares have no voting rights, except on actions which
would affect their rights to exchange shares for common shares, or on actions
to increase the authorized number of exchangeable shares.

Stock Options.  The Company has three nonqualified stock option plans:  (1)
1991 Stock Option Plan for Key Employees of Owens-Illinois, Inc., (2) 1994
Stock Option Plan for Directors of Owens-Illinois, Inc. and (3) 1997 Equity
Participation Plan of Owens-Illinois, Inc.  No options may be exercised in
whole or in part during the first year after the date granted.  In general,
subject to accelerated exercisability provisions related to the performance of
the Company's common stock or change of control, 50% of the options become
exercisable on the fifth anniversary of the date of the option grant, with the
remaining 50% becoming exercisable on the sixth anniversary date of the option
grant.  In general, options expire the day after the tenth anniversary date of
the option grant or following termination of employment.  

All options have been granted at prices equal to the market price of the
Company's common stock on the date granted.  Accordingly, the Company
recognizes no compensation expense related to the stock option plans.  The
Company has adopted the disclosure-only provisions of Statement of Financial

                                      53

<PAGE>
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation."  If the Company had elected to recognize compensation cost
based on the fair value of the options granted at grant date as allowed by
SFAS No. 123, pro forma net income and earnings per share would have been as 
follows:

- -----------------------------------------------------------------------------
                                                   1997        1996      1995
- -----------------------------------------------------------------------------
Net income:
  As reported                                    $167.9      $191.1    $169.1
  Pro forma                                       166.3       190.6     169.0
Basic earnings per share:
  As reported                                      1.25        1.58      1.40
  Pro forma                                        1.23        1.57      1.40
Diluted earnings per share:
  As reported                                      1.24        1.55      1.37
  Pro forma                                      $ 1.23      $ 1.54    $ 1.37
- -----------------------------------------------------------------------------

The pro forma effect on net income is not representative of the pro forma
effect on net income in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1995.  Assuming similar grants in future years, the pro forma effects will not
be fully reflected until 2000.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions:

- -----------------------------------------------------------------------------
                                                   1997        1996      1995
- -----------------------------------------------------------------------------
Expected life of options                        5 years     5 years   5 years
Expected stock price volatility                   26.3%       27.3%     27.3%
Risk-free interest rate                           6.08%       6.70%     6.03%
Expected dividend yield                           0.00%       0.00%     0.00%
- -----------------------------------------------------------------------------
















                                      54

<PAGE>
Stock option activity is as follows:                                        

- -----------------------------------------------------------------------------
                                                          Weighted   Weighted
                                                          Average    Average
                                              Number of   Exercise     Fair
                                                Shares     Price      Value  
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1994      5,314,400      $7.37
  Granted                                       528,450      13.25      $4.76
  Exercised                                    (470,900)      5.01
  Cancelled                                     (40,750)     11.91           
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1995      5,331,200       8.13
  Granted                                       552,200      16.50      $6.14
  Exercised                                    (435,426)      6.32
  Cancelled                                     (73,125)     12.49           
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1996      5,374,849       9.08
  Granted                                     1,188,787      31.73     $11.18
  Exercised                                  (3,192,874)      6.66
  Cancelled                                     (28,987)     21.43           
- -----------------------------------------------------------------------------
Options outstanding at December 31, 1997      3,341,775     $19.35           
==================================================================

Options exercisable at:
  December 31, 1997                           2,202,125     $12.99
  December 31, 1996                           3,971,378      $7.34
  December 31, 1995                           3,272,761      $5.56
==================================================================

Shares available for option grant at:
  December 31, 1997                          10,135,765
  December 31, 1996                           1,295,565
  December 31, 1995                           1,774,640
=======================================================
















                                      55

<PAGE>
The following table summarizes significant option groups outstanding at
December 31, 1997, and related weighted average price and life information:

                             Options Outstanding          Options Exercisable 
                       --------------------------------  ---------------------
                                    Weighted
                                     Average
                                    Remaining  Weighted               Weighted
    Range of                        Contract-  Average                Average
    Exercise             Options     ual Life  Exercise    Options    Exercise
     Prices            Outstanding  (in years)  Price    Exercisable   Price  
- -------------------------------------------------------  ---------------------
$ 5.00 to $12.50         1,247,978      4.7      $10.89    1,247,978    $10.89
$12.51 to $16.50           917,460      8.0      $14.97      917,460    $14.97
$16.51 to $36.31         1,176,337      9.5      $31.73       36,687    $34.99
- ------------------------------------------------------------------------------
                         3,341,775                         2,202,125          
==============================================================================

Pension Benefit Plans.  Net credits to results of operations for all of the 
Company's pension plans and certain deferred compensation arrangements
amounted to $40.2 million in 1997, $29.8 million in 1996, and $31.5 million in
1995.  

The Company has pension plans covering substantially all domestic employees. 
Benefits generally are based on compensation for salaried employees and on
length of service for hourly employees.  The Company's policy is to fund
domestic pension plans such that sufficient assets will be available to meet
future benefit requirements.

The following tables relate to the Company's principal domestic pension plans.

The funded status at year-end was as follows:

- ----------------------------------------------------------------------------
                                                         1997           1996
- ----------------------------------------------------------------------------
Actuarial present value of benefit obligations:
  Vested                                             $1,722.2       $1,614.9
  Nonvested                                             110.8          103.0
- ----------------------------------------------------------------------------
    Accumulated benefit obligation                    1,833.0        1,717.9
  Effect of assumed benefit increases                   157.6          131.6
- ----------------------------------------------------------------------------
    Projected benefit obligation                      1,990.6        1,849.5
Plan assets at fair value                             3,103.6        2,662.1
- ----------------------------------------------------------------------------
Plan assets in excess of projected benefit
  obligation                                          1,113.0          812.6
Unrecognized prior service cost                          42.7           34.9
Unrecognized net loss (gain)                           (520.4)        (223.0)
- ----------------------------------------------------------------------------
Prepaid pension                                      $  635.3       $  624.5
============================================================================

                                      56

<PAGE>
The components of the net pension credit for the year were as follows:

- --------------------------------------------------------------------------
                                              1997        1996        1995
- --------------------------------------------------------------------------
Service cost (benefits earned
  during the period)                       $  25.0     $  25.7     $  19.7
Interest cost on projected
  benefit obligation                         135.6       134.4       137.4
Actual return on plan assets                (627.2)     (492.7)     (504.3)
Net amortization and deferral                408.6       286.1       300.9 
- --------------------------------------------------------------------------
                                           $ (58.0)    $ (46.5)    $ (46.3)
==========================================================================

The actuarial present value of benefit obligations is based on a discount rate
of 7.00% for 1997 and 7.50% for 1996.  Future benefits are assumed to increase
in a manner consistent with past experience of the plans, which, to the extent
benefits are based on compensation, includes assumed salary increases on a
scale of 5% for 1997 and 1996.  The expected long-term rate of return on
assets was 10% for 1997, 1996 and 1995.  Amortization included in net pension
credits is based on the average remaining service of employees.  Plan assets
include marketable equity securities which, at December 31, 1997, included
16,022,880 (18,966,317 at December 31, 1996) shares of the Company's common
stock, government and corporate debt securities, real estate and commingled
funds.  During 1997, 1996 and 1995, the Company transferred $35.5 million,
$35.0 million and $22.0 million, respectively, of pension plan assets to a
special trust for the purpose of funding qualified current retiree health
liabilities.

The Company also sponsors several defined contribution plans for all salary
and hourly domestic employees.  Participation is voluntary and participants'
contributions are based on their compensation.  The Company matches
substantially all plan participants' contributions up to various limits. 
Company contributions to these plans amounted to $9.6 million in 1997, $7.5
million in 1996, and $7.4 million in 1995.

Postretirement Benefits Other Than Pensions.  The Company provides certain
retiree health care and life insurance benefits covering substantially all
U.S. salaried and certain hourly employees.  Employees are generally eligible
for benefits upon retirement and completion of a specified number of years of
creditable service.  











                                      57

<PAGE>
The components of the net postretirement benefit cost for the year were as
follows:

- -----------------------------------------------------------------------------
                                               1997         1996         1995
- -----------------------------------------------------------------------------
Service cost (benefits earned during 
  the period)                                $  2.0       $  2.0       $  1.6
Interest cost on accumulated  
  postretirement benefit obligation            21.8         21.8         23.5
Net amortization and deferral                 (13.0)       (13.2)       (13.7)
- -----------------------------------------------------------------------------
  Net postretirement benefit cost            $ 10.8       $ 10.6       $ 11.4
=============================================================================

The components of the accumulated postretirement benefit obligation and
amounts accrued at year-end were as follows:

- -----------------------------------------------------------------------------
                                                            1997         1996
- -----------------------------------------------------------------------------
Actuarial present value of benefit obligations:
  Retirees and dependents                                 $259.1       $258.4
  Eligible active employees                                 18.3         21.5
  Other active employees                                    30.1         22.7
- -----------------------------------------------------------------------------
                                                           307.5        302.6
Unamortized prior service credit                            87.1        100.7 
Unrecognized net loss                                      (39.8)       (31.6)
- -----------------------------------------------------------------------------
  Nonpension postretirement benefits                      $354.8       $371.7
=============================================================================

Assumed health care cost inflation was based on a rate of 7.50% in 1997 and
8.00% in 1996, declining ratably to an ultimate rate of 6.00% in the year
2000.  A one percentage point increase in these rates would have increased the
accumulated postretirement benefit obligation at December 31, 1997 by $11.9
million and increased the net postretirement benefit cost for 1997 by $1.1
million.  The assumed discount rates used in determining the accumulated
postretirement benefit obligation were 7.00% and 7.50% at December 31, 1997
and 1996, respectively.  Amortization included in net postretirement benefit
cost is based on the average remaining service of employees.

Benefits provided by the Company for certain of the hourly retirees are
determined by collective bargaining.  Most other domestic hourly retirees
receive health and life insurance benefits from a multiemployer trust
established by collective bargaining.  Payments to the trust as required by
the bargaining agreements are based upon specified amounts per hour worked and
were $8.6 million in 1997, $7.5 million in 1996, and $7.1 million in 1995. 
Postretirement health and life benefits for retirees of foreign affiliates are
generally provided through the national health care programs of the countries
in which the affiliates are located.

                                      58

<PAGE>
Other Revenues.  Other revenues for the year ended December 31, 1997, includes
a gain of $16.3 million from the sale of the remaining 49% interest in Kimble
Glass.  

Other Costs and Expenses.  Other costs and expenses for the year ended
December 31, 1997, includes $14.1 million principally for guarantees of
certain lease obligations of a business divested several years ago.  Other
costs and expenses for the year ended December 31, 1995, includes $40 million
to write down the asbestos insurance asset and a net credit of $40 million
primarily from the reduction of previously established restructuring reserves. 

Extraordinary Charges from Early Extinguishment of Debt.  During 1997, the
Company used the proceeds from the Offerings along with borrowings under its
Bank Credit Agreement to redeem:  (1) $957.4 million aggregate principal
amount of the 11% Senior Debentures due 2003, at 109.56% of the principal
amount plus a $20 consent payment per debenture for consents to proposed
amendments to the indenture relating to the debentures; (2) all $250 million
aggregate principal amount of the 10.25% Senior Subordinated Notes due 1999,
at 100% of the principal amount; (3) all $150 million aggregate principal
amount of the 10.50% Senior Subordinated Notes due 2002, at 105.25% of the
principal amount; (4) all $250 million aggregate principal amount of the 10%
Senior Subordinated Notes due 2002, at 105% of the principal amount; (5) all
$200 million aggregate principal amount of the 9.75% Senior Subordinated Notes
due 2004, at 104.875% of the principal amount; and (6) all $100 million
aggregate principal amount of the 9.95% Senior Subordinated Notes due 2004, at
104.975% of the principal amount.  As a result, the Company recorded
extraordinary charges for redemption premiums and the write-off of unamortized
deferred finance fees totaling $169.2 million, net of applicable income tax
effects of $64.7 million.

Contingencies.  The Company was contingently liable at December 31, 1997,
under guarantees of loans and lease obligations related to certain divested
businesses, equity associates and other third parties in the principal amount
of $18.9 million.

The Company is one of a number of defendants (typically 10 to 20) in a
substantial number of lawsuits filed in numerous state and federal courts by
persons alleging bodily injury (including death) as a result of exposure to
dust from asbestos fibers.  From 1948 to 1958, one of the Company's former
business units commercially produced and sold a high-temperature, clay-based
insulating material containing asbestos.  The insulation material was used in
limited industrial applications such as shipyards, power plants and chemical
plants.  During its ten years in the high-temperature insulation business, the
Company's aggregate sales of insulation material containing asbestos were less
than $40 million.  The Company exited the insulation business in April 1958. 
The traditional asbestos personal injury lawsuits and claims relating to such
production and sale of asbestos material typically allege various theories of
liability, including negligence, gross negligence and strict liability and
seek compensatory and punitive damages in various amounts (herein referred to
as "asbestos claims").  As of December 31, 1997, the Company estimates that it



                                      59

<PAGE>
is a named defendant in asbestos claims involving approximately 14,000
plaintiffs and claimants.

The following table shows the approximate number of plaintiffs and claimants
involved in asbestos claims pending at the beginning of, disposed of and filed
during, and pending at the end of, each of the years listed (eliminating
duplicate filings):

                                               1997        1996        1995 
                                              ------      ------      ------
Pending at beginning of year                  16,000      21,000      29,000
Disposed                                       7,000      13,000      24,000
Filed                                          5,000       8,000      16,000
                                              ------      ------      ------
Pending at end of year                        14,000      16,000      21,000
                                              ======      ======      ======

Since receiving its first asbestos claim, the Company, as of December 31,
1997, has disposed of the asbestos claims of approximately 210,000 plaintiffs
and claimants at an average indemnity payment per claim of approximately
$4,200.  Certain of these dispositions have included deferred payment amounts
payable over periods ranging from one to seven years.  Deferred payments at
December 31, 1997 totaled $64.4 million and are included in the foregoing
average indemnity payment per claim. The Company believes the 1995 filings
were in part attributable to the efforts of claimants attempting to avoid the
impact of various state "tort reform" legislative proposals.

The Company's indemnity payments for these claims have varied on a per claim
basis, and are expected to continue to vary considerably over time.  They are
affected by a multitude of factors, including the type and severity of the
disease sustained by the claimant; the occupation of the claimant; the extent
of the claimant's exposure to asbestos-containing insulation products
manufactured or sold by the Company; the extent of the claimant's exposure to
asbestos-containing products manufactured or sold by other producers; the
number and financial resources of other defendants and the nature and extent
of indemnity or contribution claims that may be asserted by or against such
other defendants; the jurisdiction of suit; the presence or absence of other
possible causes of the claimant's illness; the availability of legal defenses
such as the statute of limitations or state of the art; and whether the claim
was resolved on an individual basis or as part of a group settlement.

The Company's indemnity payments may also be affected by co-defendant
bankruptcy and class action filings.  Since 1982 a number of former producers
of asbestos-containing products have filed for reorganization under Chapter 11
of the United States Bankruptcy Code ("Co-Defendant Bankruptcies").  Pending
lawsuits are generally stayed as to these entities, but continue against the
Company and other defendants.  The precise impact on the Company of these
Co-Defendant Bankruptcies is not determinable.  However, the Company believes
that the Co-Defendant Bankruptcies probably have adversely affected, and may
adversely affect in the future, the Company's share of the total liability to
plaintiffs in previously settled or otherwise determined lawsuits and claims. 


                                      60

<PAGE>
The Company is also one of a number of defendants in (i) bodily injury
lawsuits involving plaintiffs who allege that they are or were maritime
workers ("Maritime Claims"), (ii) a lawsuit on behalf of individuals in
Pennsylvania who have no asbestos-related impairment, but nevertheless seek
the costs of future medical monitoring ("Medical Monitoring Claims"), (iii)
defendants' claims for contribution ("Contribution Claims") and (iv) lawsuits
brought by public or private property owners alleging damages to their various
properties ("Property Damage Claims").  Certain of these Maritime Claims,
Medical Monitoring Claims and Property Damage Claims seek class action
treatment.  Based on its past experience, the Company presently believes that
the probable ultimate disposition of these Maritime Claims, Medical Monitoring
Claims, Contribution Claims and Property Damage Claims will not involve any
material additional liability and does not include them in the description
herein of asbestos claims or in the total number of pending asbestos claims
above.

In April 1986, the Company and Aetna Life & Casualty Company ("Aetna") agreed
to a final settlement fully resolving asbestos bodily injury and property
damage insurance coverage litigation between them (which followed the entry of
partial summary judgment in favor of the Company in such litigation).  The
Company has processed claims which have effectively exhausted its coverage
under the Aetna agreement.  In 1984, the Company initiated similar litigation
in New Jersey against the Company's insurers, including its wholly-owned
captive insurer Owens Insurance Limited ("OIL"), and certain other parties for
the years 1977 through 1985 in which the Company sought damages and a
declaration of coverage for both asbestos bodily injury and property damage
claims under insurance policies in effect during those years (Owens-Illinois,
Inc. v. United Insurance Co., et al, Superior Court of New Jersey, Middlesex
County, November 30, 1984).

In December 1994, the Company partially settled for approximately $100 million
its coverage claim against OIL to the extent of reinsurance provided to OIL by
certain reinsurance companies representing approximately 19% of total United
Insurance coverage limits.  Subsequently, the Company reached separate
settlements for approximately $140 million with various other reinsurers, and
with OIL to the extent of reinsurance provided by such settling reinsurance
companies.  These settlements also included all of the reinsurers who had
participated actively as litigating parties in the United Insurance case.  

Following the settlements described above, a settlement agreement (the "OIL
Settlement") was reached with OIL.  The OIL Settlement, which was endorsed by
three mediators and approved by OIL's independent directors, called for the
payment of remaining non-settled reinsurance at 78.5% of applicable
reinsurance limits, increasing to 81% on approximately March 1, 1996 and
accruing interest thereafter at 10% per annum.  

In December 1995, the presiding judge in the United Insurance case entered a
Consent Judgment settling the United Insurance case as to all remaining issues
and all parties with the single exception of a broker malpractice claim
asserted by the Company, which remains pending.  In the Consent Judgment
Order, the presiding judge specifically found that the OIL Settlement was a


                                      61

<PAGE>
good faith and non-collusive settlement and that it was fair and reasonable as
to OIL and all of OIL's non-settling reinsurers.  

In November 1995, before all the settlements described above were finalized, a
reinsurer of OIL during the years affected by the United Insurance case
brought a separate suit against OIL seeking a declaratory judgment that it had
no reinsurance obligation to OIL due to alleged OIL fraud and also to OIL  
not having joined non-party reinsurers as parties in the United Insurance case
as alleged to be required under New Jersey's "entire controversy" doctrine
(Employer's Mutual vs Owens-Insurance Limited, Superior Court of New Jersey,
Morris County, December 1995).  The Company was not a named party to this
cause of action but was subsequently joined in it as a necessary party
defendant.  

Subsequent to the entry of the Consent Judgment Order in the United Insurance
case described above, OIL gave notice of the OIL Settlement to all nonsettling
reinsurers affected by the United Insurance case, informing all such
reinsurers of the terms of the OIL Settlement and demanding timely payment
from such reinsurers pursuant to such terms.  

Since the date of the OIL settlement, 17 previously nonsettling reinsurers
have made the payments called for under the OIL Settlement or otherwise
settled their obligations thereunder.  Other nonsettling solvent reinsurers,
all of which are parties to the Employers Mutual case described above, have
not, however, made the payments called for under the OIL Settlement.

In June 1996, the Superior Court of New Jersey, Morris County granted OIL
summary judgment on the "entire controversy" doctrine claim in the Employers
Mutual case.  A petition for interlocutory appeal of this summary judgment by
certain nonsettling OIL reinsurers was rejected first by the Appellate
Division of the New Jersey Superior Court and thereafter by the New Jersey
Supreme Court.

In January 1998, this same court granted OIL partial summary judgment barring
the nonsettling OIL reinsurers' fraud claims.  The nonsettling OIL reinsurers
have petitioned for interlocutory appeal of this grant of partial summary
judgment.

As a result of payments and commitments that have been made by reinsurers
pursuant to the OIL Settlement and the earlier settlement agreements described
above in the United Insurance case and certain other available insurance, the
Company has to date confirmed coverage for its asbestos-related costs of
approximately $308.4 million.  Of the total amount confirmed to date, $270.7
million had been received through December 31, 1997; and the balance of
approximately $37.7 million will be received throughout 1998 and the next
several years.  The remainder of the insurance asset of approximately $201.6
million relates principally to the reinsurers who have not yet paid, and
continue to contest, their reinsurance obligations under the OIL Settlement. 
This $201.6 million asset valuation at December 31, 1997 also reflects 1994
and 1995 reductions of $100 million and $40 million, respectively, in the
insurance asset valuation of $650 million established in 1993, which had been


                                      62

<PAGE>
made to reflect settlement activity and litigation developments in the United
Insurance case.

The Company believes, based on the rulings of the trial court, the Appellate
Division and the New Jersey Supreme Court in the United Insurance case, as
well as its understanding of the facts and legal precedents (including
specifically the legal precedent requiring that reinsurers "follow the
fortunes" of and adhere to any good faith, fair and reasonable settlement
entered into by the primary carrier which such reinsurers had agreed to
reinsure) and based on advice of counsel, McCarter & English, that it is
probable substantial additional payments will be received to cover the
Company's asbestos-related claim losses, in addition to the amounts already
received or to be received as a result of the settlements described above.

As a result of the Co-Defendant Bankruptcies and the continuing efforts in
various federal and state courts to resolve asbestos lawsuits and claims in
nontraditional manners, as well as the continued filings of new lawsuits and
claims, the Company believes that its ultimate asbestos-related contingent
liability (i.e., its indemnity or other claim disposition costs plus related
litigation expenses) is difficult to estimate with certainty.  However, the
Company has continually monitored the trends of matters which may affect its
ultimate liability and continually analyzes the trends, developments and
variables affecting or likely to affect the resolution of pending and future
asbestos claims against the Company.

Based on all the factors and matters relating to the Company's asbestos-
related litigation and claims, the Company believes that its asbestos-related
costs and liabilities will not exceed by a material amount the sum of the
available insurance reimbursement the Company believes it has and will have
principally as a result of the United Insurance case, and the OIL Settlement,
as described above, and the amount of previous charges for asbestos-related
costs.

Other litigation is pending against the Company, in many cases involving
ordinary and routine claims incidental to the business of the Company and in
others presenting allegations that are nonroutine and involve compensatory,
punitive or treble damage claims as well as other types of relief.  The
ultimate legal and financial liability of the Company in respect to the
lawsuits and proceedings referred to above, in addition to other pending
litigation, cannot be estimated with certainty.  However, the Company
believes, based on its examination and review of such matters and experience
to date, that such ultimate liability will not be material in relation to the
Company's Consolidated Financial Statements.

Subsequent Event.  On March 1, 1998, the Company signed a definitive agreement
to acquire the worldwide glass and plastic packaging businesses of BTR Plc
("BTR") in an all cash transaction valued at approximately $3.6 billion.  The
acquisition is subject to the approval of BTR's shareholders and regulatory
approvals.  Although there can be no assurance of these approvals, the Company
believes that the approvals will be obtained and that the acquisition will
close in the second quarter of 1998.


                                      63

<PAGE>
The Company has secured commitments from certain banks participating in its
Bank Credit Agreement to provide financing to consummate the acquisition. 
Following the closing, the Company plans to refinance a portion of the bank
borrowings with public offerings of debt and equity securities.  On March 6,
1998, the Company filed a universal shelf registration statement with the
Securities and Exchange Commission for offerings of up to $4.0 billion of debt
securities, preferred stock, common stock, or some combination thereof from
time to time as market conditions permit.

The acquisition will be accounted for under the purchase method of accounting. 
The total purchase cost will be allocated to the tangible and identifiable
intangible assets and liabilities based upon their respective fair values. 
The BTR packaging businesses being purchased by the Company had 1997 sales of
approximately $1.5 billion.







































                                      64

<PAGE>
Segment Information.

The Company has two industry segments:  (1) Glass Containers; and (2) Plastics
Group.

Operating profit includes an allocation of corporate expenses based on both a
percentage of sales and direct billings based on the costs of specific
services provided.

Transfers between segments and geographic areas are not significant.  In
arriving at the consolidated totals for segments and geographic areas,
eliminations are made as follows:  as to sales and transfers, intersegment and
intergeographic sales and transfers are eliminated; as to operating profit and
identifiable assets, eliminations primarily relate to unrealized profit in
inventory.

Financial information regarding the Company's geographic segments is as
follows:

- ----------------------------------------------------------------------------
                                            1997          1996          1995
- ----------------------------------------------------------------------------
Sales to unaffiliated customers:
  United States                         $2,917.6      $2,725.2      $2,702.8
  Other Western Hemisphere                 643.4         576.9         636.7
  Europe and Asia                        1,097.5         543.6         423.7
- ----------------------------------------------------------------------------
    Consolidated total                  $4,658.5      $3,845.7      $3,763.2
============================================================================

Operating profit:
  United States (a)                     $  449.5      $  425.4      $  419.5
  Other Western Hemisphere                 117.2          98.3         151.6
  Europe and Asia                          146.0          74.0          50.4
  Eliminations                               1.3           (.9)           .1 
- ----------------------------------------------------------------------------
    Combined segment total              $  714.0      $  596.8      $  621.6
============================================================================

Identifiable assets:
  United States                         $3,285.7      $3,031.4      $2,952.6
  Other Western Hemisphere                 800.9         754.1         697.4
  Europe and Asia                        1,572.3       1,110.6         525.5
  Eliminations                               (.3)         (1.1)         (1.3)
- ----------------------------------------------------------------------------
    Combined segment total              $5,658.6      $4,895.0      $4,174.2
============================================================================

(a)  Operating profit for the United States geographic segment includes a net
     credit of $40.0 million in 1995 primarily from the reduction of
     previously established restructuring reserves.


                                      65

<PAGE>
Financial information regarding the Company's worldwide industry segments is
as follows:

- ----------------------------------------------------------------------------
                                            1997          1996      1995 (b)
- ----------------------------------------------------------------------------
Sales to unaffiliated customers (a):
  Glass Containers                      $3,528.4      $2,783.3      $2,744.0
  Plastics Group                         1,128.6       1,060.7       1,017.7
  Other                                      1.5           1.7           1.5
- ----------------------------------------------------------------------------
    Consolidated total                  $4,658.5      $3,845.7      $3,763.2
============================================================================

Operating profit:
  Glass Containers                      $  525.2      $  424.5      $  482.7
  Plastics Group                           188.7         172.1         137.4
  Eliminations                                .1            .2           1.5
- ----------------------------------------------------------------------------
    Combined segment total                 714.0         596.8         621.6
  Other retained costs                       (.5)         (7.6)        (56.1)
- ----------------------------------------------------------------------------
    Consolidated total                     713.5         589.2         565.5

Equity earnings                             17.9          15.2          14.4
Interest expense (net)                    (279.1)       (280.3)       (269.9)
- ----------------------------------------------------------------------------
                                           452.3         324.1         310.0 
Reconciliation to earnings before 
  extraordinary items:
    Provision for income taxes            (148.5)       (104.9)       (100.8)
    Minority share owners' interests       (31.4)        (28.1)        (40.1) 
- ----------------------------------------------------------------------------
Earnings before extraordinary items     $  272.4      $  191.1      $  169.1   
============================================================================

(a)  Sales of similar products which contributed 10% or more of consolidated
     net sales for 1997, 1996, and 1995, and their percentage contribution in
     each year, respectively, are glass containers with 71%, 66%, and 66%; and
     plastic containers with 15%, 17%, and 16%.  In 1996 and 1995, sales by
     both the Glass Containers and Plastics Group industry segments to one
     customer aggregated approximately 10% and 11%, respectively, of
     consolidated total sales.

(b)  Operating profit for 1995 includes a charge of $40.0 million to write
     down the asbestos insurance asset and a net credit of $40.0 million
     primarily from the reduction of previously established restructuring
     reserves.  These items increased (decreased) operating profit as follows: 
     Glass Containers, $45.1 million; Plastics Group, $(5.1) million; and
     other retained costs, $(40.0) million.



                                      66

<PAGE>
- -----------------------------------------------------------------------------
                                                 1997        1996        1995
- -----------------------------------------------------------------------------
Identifiable assets:
  Glass Containers                           $4,232.0    $3,557.5    $2,880.6
  Plastics Group                              1,427.0     1,338.0     1,295.0 
  Eliminations                                    (.4)        (.5)       (1.4)
- -----------------------------------------------------------------------------
    Combined segment total                    5,658.6     4,895.0     4,174.2
  Investments in and advances
    to associates                                87.7        85.6        84.1
  Corporate and other 
    retained assets                           1,098.8     1,124.7     1,180.9
- -----------------------------------------------------------------------------
  Total                                      $6,845.1    $6,105.3    $5,439.2
=============================================================================

Property, plant and equipment 
- -- capital expenditures:
  Glass Containers                           $  317.4    $  298.1    $  209.0
  Plastics Group                                119.9        88.7        67.8
- -----------------------------------------------------------------------------
    Combined segment total                      437.3       386.8       276.8
  Corporate and other
    retained assets                              34.0         1.6         6.8
- -----------------------------------------------------------------------------
  Total                                     $   471.3    $  388.4    $  283.6
=============================================================================

Property, plant and equipment 
- -- depreciation:
  Glass Containers                          $   215.1    $  151.2    $  125.5
  Plastics Group                                 64.7        64.4        59.2
- -----------------------------------------------------------------------------
    Combined segment total                      279.8       215.6       184.7
  Corporate and other
    retained assets                               3.7         4.2         3.6
- -----------------------------------------------------------------------------
  Total                                     $   283.5    $  219.8    $  188.3
=============================================================================













                                      67

<PAGE>
Selected Quarterly Financial Data (unaudited).  The following tables present
selected financial data by quarter for the years ended December 31, 1997 and
1996:

- -----------------------------------------------------------------------------
                                  1997 (a)                                   
- -----------------------------------------------------------------------------
                           First     Second      Third     Fourth            
                          Quarter    Quarter    Quarter    Quarter      Total
- -----------------------------------------------------------------------------
Net sales                $1,056.3   $1,224.5   $1,239.5   $1,138.2   $4,658.5
=============================================================================
Gross profit             $  211.4   $  294.8   $  278.1   $  207.8   $  992.1
=============================================================================
Earnings (loss):
  Before extraordinary
    items                $   54.6   $   86.9   $   91.8   $   39.1   $  272.4
  Extraordinary charges
    from early 
    extinguishment of 
    debt, net of applicable
    income taxes                       (84.5)     (16.4)      (3.6)    (104.5)
- -----------------------------------------------------------------------------
  Net earnings           $   54.6   $    2.4   $   75.4   $   35.5   $  167.9
=============================================================================

Earnings (loss) per share
  of common stock (b):
  Basic:
    Before extraordinary
      items              $   0.44   $   0.66   $   0.65   $   0.28   $   2.03
    Extraordinary 
      charges                          (0.64)     (0.12)     (0.03)     (0.78)
- -----------------------------------------------------------------------------
    Net earnings         $   0.44   $   0.02   $   0.53   $   0.25   $   1.25

  Diluted:
    Before extraordinary
      items              $   0.44   $   0.65   $   0.65   $   0.27   $   2.01
    Extraordinary
      charges                          (0.63)     (0.12)     (0.02)     (0.77)
- -----------------------------------------------------------------------------
    Net earnings         $   0.44   $   0.02   $   0.53   $   0.25   $   1.24 
=============================================================================

(a)  In the first quarter of 1997, the Company recorded:  (1) a gain of $16.3
     million ($16.3 million aftertax) on the sale of the remaining 49%
     interest in Kimble Glass; and (2) charges of $14.1 million ($8.7 million
     aftertax) principally for guarantees of certain lease obligations of a
     business divested several years ago.  The net aftertax amounts of these
     items was a credit of $7.6 million, or $0.06 per share on both a basic
     and diluted basis.  

                                      68

<PAGE>
(b)  Earnings per share are computed independently for each period presented. 
     Due to the issuance of 16.9 million shares of common stock in the second
     quarter of 1997 and the resultant effect on average shares outstanding,
     per share amounts calculated on a year-to-date basis do not equal the
     sums of such amounts calculated separately for each quarter.
             
- -----------------------------------------------------------------------------
                                    1996                                     
- -----------------------------------------------------------------------------
                          First      Second     Third      Fourth           
                         Quarter    Quarter    Quarter    Quarter       Total
- -----------------------------------------------------------------------------
Net sales                 $905.8     $963.7    $1,014.1    $962.1    $3,845.7
=============================================================================
Gross profit              $196.9     $226.2    $  225.8    $171.2    $  820.1
=============================================================================
Net earnings              $ 39.6     $ 66.6    $   62.0    $ 22.9    $  191.1 
=============================================================================

Net earnings per share
  of common stock:
  Basic                   $ 0.33     $ 0.55    $   0.51    $ 0.19    $   1.58
  Diluted                 $ 0.32     $ 0.54    $   0.50    $ 0.19    $   1.55
=============================================================================



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

None.























                                      69

<PAGE>

                                  PART III


ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to non-officer directors is included in the Proxy
Statement in the section entitled "Election of Directors" and such information
is incorporated herein by reference.

Information with respect to executive officers is included herein on pages
14 - 16.



ITEMS 11.   EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED 
and 13.     TRANSACTIONS

The section entitled "Director and Executive Compensation and Other
Information," exclusive of the subsections entitled "Board Compensation
Committee Report on Executive Compensation" and "Performance Graph," which is
included in the Proxy Statement is incorporated herein by reference.



ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The section entitled "Security Ownership of Certain Beneficial Owners and
Management" which is included in the Proxy Statement is incorporated herein by
reference.



























                                      70

<PAGE>

                                   PART IV


ITEM 14.(a).     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


Index of Financial Statements and Financial Statement Schedules Covered by
Report of Independent Auditors.

                                                                     Page
                                                                     ----
Report of Independent Auditors                                         32

Consolidated Balance Sheets at December 31, 1997 and 1996           34-35

For the years ended December 31, 1997, 1996 and 1995

     Consolidated Results of Operations                                33
     Consolidated Share Owners' Equity                                 36
     Consolidated Cash Flows                                           37

Statement of Significant Accounting Policies                        38-40

Financial Review                                                    41-67

Exhibit Index                                                       72-76

     Financial Statement Schedule                              Schedule Page
     ----------------------------                              -------------
For the years ended December 31, 1997, 1996, and 1995:

  II - Valuation and Qualifying Accounts (Consolidated)               S-1


All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule.

















                                      71

<PAGE>
                                 EXHIBIT INDEX

S-K Item 601
    No.                               Document
- ------------                          --------
3.1        -- Restated Certificate of Incorporation of Owens-Illinois, Inc.
              (filed as Exhibit 3.1 to the Registrant's Registration
              Statement, File No. 33-43224, and incorporated herein by
              reference).
3.2        -- Bylaws of Owens-Illinois, Inc., as amended (filed as Exhibit
              3.2 to the Registrant's Registration Statement, File No. 33-
              43224, and incorporated herein by reference).
3.3        -- Certificate of Designations, Preferences and Relative,
              Participating, Optional and Other Special Rights of Preferred
              Stock and Qualifications, Limitations and Restrictions Thereof
              of Series A Exchangeable Preferred Stock, Series B Exchangeable
              Preferred Stock and Series C Exchangeable Preferred Stock of
              Owens-Illinois, Inc., dated October 30, 1992 (filed as Exhibit
              3.5 to the Registrant's Annual Report on Form 10-K for the year
              ended December 31, 1992, File No. 1-9576, and incorporated
              herein by reference).
4.1        -- Indenture, dated as of December 15, 1991, among Owens-Illinois,
              Inc., Owens-Illinois Group, Inc., and The Bank of New York
              related to Senior Debentures of Owens-Illinois, Inc. (filed as
              Exhibit 4.32 to the Registrant's Registration Statement, File
              No. 33-34825, and incorporated herein by reference).
4.2        -- Supplemental Indenture, dated as of May 9, 1997, between Owens-
              Illinois, Inc., the Guarantors named therein, and The Bank of
              New York related to the 11% Senior Debentures (filed as Exhibit
              4.2 to the Registrant's Quarterly Report on Form 10-Q for the
              quarter ended June 30, 1997, File No. 1-9576, and incorporated
              herein by reference).
4.3        -- Amended and Restated Credit Agreement, dated as of May 15,
              1997, among Owens-Illinois, Inc., the lenders listed therein,
              including those named as lead managers and co-agents, The Bank
              of Nova Scotia, NationsBank, N.A., Bank of America National
              Trust and Savings Association, and Bankers Trust Company
              including exhibits thereto (filed as Exhibit 4.1 to the
              Registrant's Quarterly Report on Form 10-Q for the quarter
              ended June 30, 1997, File No. 1-9576, and incorporated herein
              by reference).
10.1       -- Lease Agreement, dated as of May 21, 1980, between Owens-
              Illinois, Inc. and Leyden Associates Limited Partnership (filed
              as Exhibit 5 to the Registrant's Registration Statement, File
              No. 2-68022, and incorporated herein by reference). 
10.2*      -- Owens-Illinois Supplemental Retirement Benefit Plan, dated as
              of October 1, 1991 (filed as Exhibit 3.5 to the Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1992, File No. 1-9576, and incorporated herein by reference).




                                      72

<PAGE>
S-K Item 601
    No.                                  Document
- ------------                             --------
10.3 *     -- First Amendment to Owens-Illinois, Inc. Supplemental Retirement
              Benefit Plan (filed as Exhibit 10.19 to the Registrant's Annual
              Report on Form 10-K for the year ended December 31, 1993, File
              No. 1-9576, and incorporated herein by reference).
10.4 *     -- Second Amendment to Owens-Illinois, Inc. Supplemental
              Retirement Benefit Plan (filed as Exhibit 10.4 to the
              Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1995, File No. 1-9576, and incorporated herein by
              reference).
10.5 *     -- Written description of the Owens-Illinois Senior Executive Life
              Insurance Plan (filed as Exhibit 3.5 to the Registrant's Annual
              Report on Form 10-K for the year ended December 31, 1992, File
              No. 1-9576, and incorporated herein by reference).
10.6 *     -- Form of Employment Agreement between Owens-Illinois, Inc. and
              various Employees (filed as Exhibit 10(m) to the Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1987, File No. 1-9576, and incorporated herein by reference).  
10.7 *     -- Form of Non-Qualified Stock Option Agreement between Owens-
              Illinois, Inc. and various Employees (filed as Exhibit 10(1) to
              the Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1987, File No. 1-9576, and incorporated herein by
              reference).
10.8 *     -- Form of Subscription Agreement between Owens-Illinois, Inc. and
              various Purchasers (filed as Exhibit 10(k) to the Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1987, File No. 1-9576, and incorporated herein by reference).
10.9 *     -- Stock Option Plan for Directors of Owens-Illinois, Inc. (filed
              as Exhibit 4.3 to Registrant's Form S-8, File No. 33-57141, and
              incorporated herein by reference).
10.10 *    -- First Amendment to Stock Option Plan for Directors of Owens-
              Illinois, Inc. (filed as Exhibit 10.10 to the Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1995, File No. 1-9576, and incorporated herein by reference).
10.11 *    -- Form of Non-Qualified Stock Option Agreement for use under the
              Stock Option Plan for Directors of Owens-Illinois, Inc. (filed
              as Exhibit 4.4 to Registrant's Form S-8, File No. 33-57141, and
              incorporated herein by reference).
10.12 *    -- Second Amended and Restated Stock Option Plan for Key Employees
              of Owens-Illinois, Inc. (filed as Exhibit 10.20 to the
              Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1994, File No. 1-9576, and incorporated herein by
              reference).
10.13 *    -- First Amendment to Second Amended and Restated Stock Option
              Plan for Key Employees of Owens-Illinois, Inc. (filed as
              Exhibit 10.13 to the Registrant's Annual Report on Form 10-K
              for the year ended December 31, 1995, File No. 1-9576, and
              incorporated herein by reference).



                                      73

<PAGE>
S-K Item 601
    No.                                  Document
- ------------                             --------
10.14 *    -- Second Amendment to Second Amended and Restated Stock Option
              Plan for Key Employees of Owens-Illinois, Inc. (filed as
              Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q
              for the quarter ended June 30, 1997, File No. 1-9576, and
              incorporated herein by reference).
10.15 *    -- Form of Non-Qualified Stock Option Agreement for use under the
              Amended and Restated Stock Option Plan for Key Employees of
              Owens-Illinois, Inc. (filed as Exhibit 10.21 to the
              Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1994, File No. 1-9576, and incorporated herein by
              reference).
10.16 *    -- Form of First Amendment to Subscription Agreement between
              Owens-Illinois, Inc. and Robert J. Lanigan (filed as Exhibit
              10.19 to the Registrant's Annual Report on Form 10-K for the
              year ended December 31, 1990, File No. 1-9576, and incorporated
              herein by reference).
10.17 *    -- Form of Non-Qualified Stock Option Agreement between Owens-
              Illinois, Inc., and Robert J. Lanigan (filed as Exhibit 10.21
              to the Registrant's Annual Report on Form 10-K for the      
              year ended December 31, 1990, File No. 1-9576, and incorporated
              herein by reference).
10.18 *    -- Form of First Amendment to Non-Qualified Stock Option Agreement
              between Owens-Illinois, Inc. and Robert J. Lanigan (filed as
              Exhibit 10.20 to the Registrant's Annual Report on Form 10-K
              for the year ended December 31, 1990, File No. 1-9576, and
              incorporated herein by reference).
10.19 *    -- Amended and Restated Owens-Illinois, Inc. Senior Management
              Incentive Plan (filed as Exhibit 10.15 to the Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1993, File No. 1-9576, and incorporated herein by reference).
10.20 *    -- First Amendment to Amended and Restated Owens-Illinois, Inc.
              Senior Management Incentive Plan (filed as Exhibit 10.19 to the
              Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1995, File No. 1-9576, and incorporated herein by
              reference).
10.21 *    -- Second Amendment to Amended and Restated Owens-Illinois, Inc.
              Senior Management Incentive Plan (filed as Exhibit 10.2 to the
              Registrant's Quarterly Report on Form 10-Q for the quarter
              ended June 30, 1997, File No. 1-9576, and incorporated herein
              by reference).
10.22 *    -- Third Amendment to Amended and Restated Owens-Illinois, Inc.
              Senior Management Incentive Plan (filed as Exhibit 10.3 to the
              Registrant's Quarterly Report on Form 10-Q for the quarter
              ended June 30, 1997, File No. 1-9576, and incorporated herein
              by reference).





                                      74

<PAGE>
S-K Item 601
    No.                                  Document
- ------------                             --------
10.23 *    -- Amended and Restated Owens-Illinois, Inc. Performance Award
              Plan (filed as Exhibit 10.16 to the Registrant's Annual Report
              on Form 10-K for the year ended December 31, 1993, File No. 1-
              9576, and incorporated herein by reference).
10.24 *    -- First Amendment to Amended and Restated Owens-Illinois, Inc.
              Performance Award Plan (filed as Exhibit 10.4 to the
              Registrant's Quarterly Report on Form 10-Q for the quarter
              ended June 30, 1997, File No. 1-9576, and incorporated herein
              by reference).
10.25 *    -- Owens-Illinois, Inc. Corporate Officers Deferred Compensation
              Plan (filed as Exhibit 10.17 to the Registrant's Annual Report
              on Form 10-K for the year ended December 31, 1993, File No. 1-
              9576, and incorporated herein by reference).
10.26 *    -- First Amendment to Owens-Illinois, Inc. Corporate Officers
              Deferred Compensation Plan (filed as Exhibit 10.22 to the
              Registrant's Annual Report on Form 10-K for the year ended
              December 31, 1995, File No. 1-9576, and incorporated herein by
              reference).
10.27 *    -- Owens-Illinois, Inc. Executive Savings Plan (filed as Exhibit
              10.18 to the Registrant's Annual Report on Form 10-K for the
              year ended December 31, 1993, File No. 1-9576, and incorporated
              herein by reference).
10.28 *    -- First Amendment to Owens-Illinois, Inc. Executive Savings Plan
              (filed as Exhibit 10.24 to the Registrant's Annual Report on
              Form 10-K for the year ended December 31, 1995, File No. 1-
              9576, and incorporated herein by reference).
10.29 *    -- Second Amendment to Owens-Illinois, Inc. Executive Savings Plan
              (filed as Exhibit 10.25 to the Registrant's Annual Report on
              Form 10-K for the year ended December 31, 1995, File No. 1-
              9576, and incorporated herein by reference).
10.30 *    -- Third Amendment to Owens-Illinois, Inc. Executive Savings Plan
              (filed as Exhibit 10.1 to the Registrant's Quarterly Report on
              Form 10-Q for the quarter ended March 31, 1997, File No. 1-
              9576, and incorporated herein by reference).
10.31 *    -- Owens-Illinois, Inc. Directors Deferred Compensation Plan
              (filed as Exhibit 10.26 to the Registrant's Annual Report on
              Form 10-K for the year ended December 31, 1995, File No. 1-
              9576, and incorporated herein by reference).
10.32 *    -- First Amendment to Owens-Illinois, Inc. Directors Deferred
              Compensation Plan (filed as Exhibit 10.27 to the Registrant's
              Annual Report on Form 10-K for the year ended December 31,
              1995, File No. 1-9576, and incorporated herein by reference).
10.33 *    -- Second Amendment to Owens-Illinois, Inc. Directors Deferred
              Compensation Plan (filed as Exhibit 10.2 to the Registrant's
              Quarterly Report on Form 10-Q for the quarter ended March 31,
              1997, File No. 1-9576, and incorporated herein by reference).




                                      75

<PAGE>
S-K Item 601
    No.                                  Document
- ------------                             --------
10.34 *    -- 1997 Equity Participation Plan of Owens-Illinois, Inc. (filed
              as Exhibit 10.5 to the Registrant's Quarterly Report on Form
              10-Q for the quarter ended June 30, 1997, File No. 1-9576, and
              incorporated herein by reference).
10.35 *    -- First Amendment to 1997 Equity Participation Plan of Owens-
              Illinois, Inc. (filed as Exhibit 4.2 to the Registrant's Form
              S-8, File No. 333-47691, and incorporated herein by reference).
10.36 *    -- Form of Non-Qualified Stock Option Agreement for use under the
              1997 Equity Participation Plan of Owens-Illinois, Inc. (filed
              as Exhibit 4.3 to the Registrant's Form S-8, File No. 333-
              47691, and incorporated herein by reference).
10.37 *    -- Form of Restricted Stock Agreement for use under the 1997
              Equity Participation Plan of Owens-Illinois, Inc. (filed as
              Exhibit 4.4 to the Registrant's Form S-8, File No. 333-47691,
              and incorporated herein by reference).
12         -- Computation of Ratio of Earnings to Fixed Charges and Earnings
              to Combined Fixed Charges and Preferred Stock Dividends (filed
              herewith).
21         -- Subsidiaries of the Registrant (filed herewith).
23.1       -- Consent of Independent Auditors (filed herewith).
23.2       -- Consent of McCarter & English (filed herewith).
24         -- Owens-Illinois, Inc. Power of Attorney (filed herewith).
27.1       -- Financial Data Schedule (filed herewith).
27.2-27.5  -- Restated Financial Data Schedules (filed herewith).

*  Indicates a management contract or compensatory plan or arrangement
   required to be filed as an exhibit to this form pursuant to Item 14(c).
- -------------             


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

No reports on Form 8-K were filed by the Registrant during the last quarter of
1997.
















                                      76

<PAGE>

                                  SIGNATURES


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


                                          OWENS-ILLINOIS, INC.


                                                 (Registrant)



                                          By /s/ Thomas L. Young            
                                            -------------------------------
                                            Thomas L. Young
                                            Executive Vice President --
                                            Administration, General Counsel
                                            and Secretary



Date:  March 30, 1998  




























                                      77

<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Owens-
Illinois, Inc. and in the capacities and on the dates indicated.


     Signature                     Title
     ---------                     -----
Robert J. Dineen       Director

Edward A. Gilhuly      Director

James H. Greene, Jr.   Director

Henry R. Kravis        Director

Robert J. Lanigan      Director

Joseph H. Lemieux      Chairman of the Board of Directors and Chief Executive
                       Officer (Principal Executive Officer); Director

John J. McMackin, Jr.  Director

Michael W. Michelson   Director

George R. Roberts      Director

Lee A. Wesselmann      Senior Vice President and Chief Financial Officer
                       (Principal Financial and Accounting Officer); Director




                                          By /s/ Thomas L. Young        
                                            --------------------
                                            Thomas L. Young
                                            Attorney-in-fact




Date:  March 30, 1998












                                      78

<PAGE>
                     INDEX TO FINANCIAL STATEMENT SCHEDULE

      Financial Statement Schedule of Owens-Illinois, Inc. and Subsidiaries:

      For the years ended December 31, 1997, 1996, and 1995:

                                                                         PAGE
                                                                         ----

II -- Valuation and Qualifying Accounts (Consolidated) . . . . . . .      S-1













































<PAGE>
                             OWENS-ILLINOIS, INC.

        SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (CONSOLIDATED)

                 Years ended December 31, 1997, 1996, and 1995
                             (Millions of Dollars)


Reserves deducted from assets in the balance sheets:

Allowances for losses and discounts on receivables
- --------------------------------------------------

                                      Additions                     
                                 -----------------
                    Balance at   Charged to                          Balance
                    beginning    costs and             Deductions   at end of
                    of period    expenses    Other      (Note 1)     period  
                    ---------------------------------------------------------

1997 . . . . . . .  $  40.6      $  51.3    $   0.0    $  39.0      $  52.9
                    =======      =======    =======    =======      =======

1996 . . . . . . .  $  39.7      $  38.5    $   0.0    $  37.6      $  40.6
                    =======      =======    =======    =======      =======

1995 . . . . . . .  $  38.7      $  32.4    $   0.0    $  31.4      $  39.7
                    =======      =======    =======    =======      =======



(1)  Deductions from allowances for losses and discounts on receivables
     represent uncollectible notes and accounts written off.




















                                      S-1





<PAGE>
                                                     Exhibit 12 -- Page 1 of 2
                             OWENS-ILLINOIS, INC.
               COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
     AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
                     (Millions of dollars, except ratios)

                                           Years ended December 31,          
                                  -------------------------------------------
                                   1997     1996     1995     1994      1993 
                                  ------   ------   ------   ------   -------
Earnings (loss) from continuing
  operations before income taxes,
  minority share owners' interests,
  extraordinary items and
  cumulative effect of accounting
  changes. . . . . . . . . . . .  $452.3   $324.1   $310.0   $171.3   $(294.5)
Pretax earnings of majority-
  owned subsidiary not
  consolidated . . . . . . . . .                                8.7       4.3
Less:  Equity earnings . . . . .   (17.9)   (15.2)   (14.4)   (22.3)    (25.3)
Add:  Total fixed charges deducted
        from earnings. . . . . .   324.1    324.3    321.1    298.0     316.4
      Proportional share of pre-
        tax earnings of 50% owned
        associates . . . . . . .     2.8                                 18.6
      Dividends received from less
        than 50% owned
        associates . . . . . . .     4.8      2.7      3.7      2.9       4.9
                                  ------   ------   ------   ------   -------
          Earnings available
          for payment of fixed
          charges. . . . . . . .  $766.1   $635.9   $620.4   $458.6   $  24.4
                                  ======   ======   ======   ======   =======
Fixed charges (including the 
  Company's proportional share of
  50% owned associates):
    Interest expense . . . . . .  $298.7   $297.6   $294.6   $273.1   $ 284.6
    Portion of operating lease
      rental deemed to be
      interest . . . . . . . . .    21.3     21.7     21.5     19.8      20.3
    Amortization of deferred 
      financing costs and debt
      discount expense . . . . .     4.1      5.0      5.0      5.1      11.5
                                  ------   ------   ------   ------   -------
          Total fixed charges
          deducted from earnings
          and total fixed 
          charges. . . . . . . .  $324.1   $324.3   $321.1   $298.0   $ 316.4

Preferred
 stock dividends
  (increased to assumed pre-tax
  amount). . . . . . . . . . . .     2.2      2.2      2.6      3.1       3.0
                                  ------   ------   ------   ------   -------
Combined fixed charges and
  preferred stock dividends. . .  $326.3   $326.5   $323.7   $301.1   $ 319.4
                                  ======   ======   ======   ======   =======
                                      E-1

<PAGE>
                                                     Exhibit 12 -- Page 2 of 2
                             OWENS-ILLINOIS, INC.
               COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
     AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
                     (Millions of dollars, except ratios)

                                           Years ended December 31,          
                                  -------------------------------------------
                                   1997     1996     1995     1994      1993 
                                  ------   ------   ------   ------   -------
Ratio of earnings to fixed
  charges. . . . . . . . . . .       2.4      2.0      1.9      1.5
Deficiency of earnings 
  available to cover fixed
  charges. . . . . . . . . . . .                                      $ 292.0
Ratio of earnings to combined 
  fixed charges and preferred
  stock dividends. . . . . . . .     2.3      1.9      1.9      1.5   
Deficiency of earnings available
  to cover combined fixed
  charges and preferred stock
  dividends. . . . . . . . . . .                                      $ 295.0


































<PAGE>
                                  EXHIBIT 21

                             OWENS-ILLINOIS, INC.

                        SUBSIDIARIES OF THE REGISTRANT

The Registrant had the following subsidiaries at December 31, 1997 (subsid-
iaries are indented following their respective parent companies):

                                               State/Country of Incorporation
Name                                                  or Organization        
- ----                                           ------------------------------
Owens-Illinois Group, Inc.                                 Delaware
   OI Health Care Holding Corp.                            Delaware
   OI General Finance Inc.                                 Delaware
   OI Closure FTS Inc.                                     Delaware
      Specialty Packaging Licensing Company Limited        Delaware
      Owens-Illinois Closure Inc.                          Delaware
         Product Design & Engineering, Inc.                Minnesota
   OI Plastic Products FTS Inc.                            Delaware
      Owens-Illinois Prescription Products Inc.            Delaware
         OI Medical Inc.                                   Delaware
            MARC Industries, Inc.                          Delaware
               EntraCare Corporation                       Kansas     
               MARC Medical Inc.                           Kansas  
               Precision Medical Molding, Inc.             Missouri
               K&M Plastics, Inc.                          Kansas
               Specialtiy Packaging Products de Mexico,
                     S.A. de C.V.                          Mexico
            OI Medical Holdings Inc.                       Delaware
               Anamed International, Inc.                  Nevada
               Martell Medical Products, Inc.              California
               Owens-BriGam Medical Company                Delaware
               BriGam, Inc.                                North Carolina
                  BriGam Medical Inc.                      North Carolina
                  BriGam Ventures, Inc.                    North Carolina
      Owens-Brockway Plastic Products Inc.                 Delaware
         Owens-Illinois Specialty Products 
               Puerto Rico, Inc.                           Delaware
         OI Regioplast STS Inc.                            Delaware
            Regioplast S.A. de C.V.                        Mexico
      Owens-Illinois Labels Inc.                           Delaware
   OI General FTS Inc.                                     Delaware
      OI Castalia STS Inc.                                 Delaware
      OI Levis Park STS Inc.                               Delaware
      OI AID STS Inc.                                      Delaware
      Owens-Illinois Leasing, Inc.                         Delaware
      Owens-Illinois General Inc.                          Delaware
         Owens Insurance, Ltd.                             Bermuda
         OI Holding Company, Inc.                          Ohio
         Owens-Illinois Foreign Sales Corp.                Virgin Islands



<PAGE>                               
Subsidiaries of the Registrant (continued)

                                               State/Country of Incorporation
Name                                                  or Organization        
- ----                                           ------------------------------
         Harbor Capital Advisors, Inc.                     Delaware
            HCA Securities, Inc.                           Delaware
            Harbor Transfer, Inc.                          Delaware
         Universal Materials, Inc.                         Ohio
   Owens-Brockway Packaging, Inc.                          Delaware
      OI Ione STS Inc.                                     Delaware
      Owens-Brockway Glass Container Inc.                  Delaware
         Brockway Realty Inc.                              Pennsylvania
         Brockway Research Inc.                            Delaware
         OI Auburn Inc.                                    Delaware
         Seagate, Inc.                                     Ohio
         OIB Produvisa Inc.                                Delaware
         OI Consol STS Inc.                                Delaware
         OI Puerto Rico STS Inc.                           Delaware
            Owens-Illinois de Puerto Rico                  Ohio
         OI Venezuela STS Inc.                             Delaware
            Owens Brockway Venezuelan Holding, C.A.        Venezuela
               Centro Vidriero de Venezuela, C.A.          Venezuela
               Manufacturera de Vidrios Planos, C.A.       Venezuela
               Owens-Illinois de Venezuela, C.A.           Venezuela
                  Fabrica de Vidrio Los Andes, C.A.        Venezuela
                  Owens-Illinois Ventas, S.A.              Venezuela
         OI Peldar STS Inc.                                Delaware
            OI Latin America Inc.                          Delaware
               OI Ecuador STS Inc.                         Delaware
                  Cristaleria del Ecuador, S.A.            Ecuador
               OI Peru STS Inc.                            Delaware
                  Vidrios Industriales S.A.                Peru
         Bolivian Investments, Inc.                        Delaware
         Fabrica Boliviana de Vidrios S.A.                 Bolivia
         OI Brazil Inc.                                    Delaware
            Owens-Illinois International B.V.              Netherlands
               Cristaleria Peldar, S.A.                    Colombia
               Sao Raimundo Administracao, Participacoes
                     e Representacoes, Limitada            Brazil
                  Companhia Industrial Sao Paulo e Rio     Brazil
               OI Finnish Holdings Oy                      Finland
                  Ryttylan Muovi Oy                        Finland
                  Karhulan Lasi Oy                         Finland
                  A/S Jarvakandi Klaas                     Estonia
         OI Machineworks Inc.                              Delaware
            O-I Europe (Machinery and Distribution) 
                  Limited                                  United Kingdom
         OI Overseas Management Company Limited            Delaware
            United Glass Group Ltd.                        United Kingdom
               United Glass, Limited                       United Kingdom



<PAGE>                                      
Subsidiaries of the Registrant (continued)

                                               State/Country of Incorporation
Name                                                  or Organization        
- ----                                           ------------------------------
         OI Poland Inc.                                    Delaware
            Huta Szkla Jaroslaw S.A.                       Poland
         OI Hungary Inc.                                   Delaware
            Oroshaza Glass Manufacturing and Trading Kft.  Hungary
         OI Italy Inc.                                     Delaware
            OI Italy Holdings Inc.                         Delaware
            OI Italia S.r.l.                               Italy
               Orion S.p.A.                                Italy
                  AVIR S.p.A.                              Italy
                     Avirunion, a.s.                       Czech Republic
                     Sonator Investments B.V.              Netherlands
                        Vidrieria Rovira, S.A.             Spain
         OI India Inc.                                     Delaware
            Owens-BILT Limited                             India
         OI China Inc.                                     Delaware
            Wuhan-Owens Glass Container Co., Ltd.          China
         OI Thailand Inc.                                  Delaware
            OI Pacific (Machinery and Distribution) 
                  Limited                                  Thailand


































<PAGE>
                                 EXHIBIT 23.1
                             OWENS-ILLINOIS, INC.
                        CONSENT OF INDEPENDENT AUDITORS


We consent to the reference to our firm under the caption "Selected Financial
Data."  

We also consent to the incorporation by reference in the Registration 
Statement (Form S-3 No. 333-47519) of Owens-Illinois, Inc. and in the related
Prospectus, in the Registration Statement (Form S-8 No. 33-57139) pertaining
to the Amended and Restated Owens-Illinois, Inc. Stock Purchase and Savings
Program and the Amended and Restated Owens-Illinois, Inc. Long-Term Savings
Plan, in the Registration Statement (Form S-8 No. 33-44252) pertaining to the
Amended and Restated Stock Option Plan for Key Employees of Owens-Illinois,
Inc., in the Registration Statement (Form S-8 No. 33-57141) pertaining to the
Stock Option Plan for Directors of Owens-Illinois, Inc., and in the 
Registration Statement (Form S-8 No. 333-47691) pertaining to the 1997 Equity 
Participation Plan of Owens-Illinois, Inc. of our report dated February 3, 
1998 (except for information in the section entitled "Subsequent Event" on 
page 63, as to which the date is March 6, 1998) with respect to the 
consolidated financial statements and schedule of Owens-Illinois, Inc., 
included in this Annual Report (Form 10-K) for the year ended
 December 31, 
1997.




                                               /s/ Ernst & Young LLP
                                               ---------------------
                                               Ernst & Young LLP



Toledo, Ohio
March 30, 1998




















<PAGE>
                                 EXHIBIT 23.2
                      CONSENT OF MCCARTER & ENGLISH, LLP
 
 
 
 
  
                                                            March 27, 1998
   
 
 
Ladies and Gentlemen: 
 
      We consent to the incorporation by reference in this Annual Report on
Form 10-K of Owens-Illinois, Inc. for the year ended December 31, 1997, of 
the reference to our firm under the caption "Legal Proceedings." 
 
 
 
                                          Very truly yours, 
 
 
 
 
                                          /s/ McCarter & English, LLP
                                          ---------------------------
                                          McCarter & English, LLP































<PAGE>
                                      EXHIBIT 24
                                  OWENS-ILLINOIS, INC.
                                   POWER OF ATTORNEY

          KNOW ALL MEN BY THESE PRESENTS:  That each individual whose 
signature appears below hereby consents to and appoints Thomas L. Young, Lee
A. Wesselmann, or either of them, individually, as his true and lawful
attorney-in-fact and agent with all power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the 1997 Annual
Report on Form 10-K of Owens-Illinois, Inc., a corporation organized and 
existing under the laws of the State of Delaware, and any and all amendments 
thereto, and to file the same, with all exhibits thereto, and all documents 
in connection therewith, with the Securities and Exchange Commission pursuant
to the requirements of the Securities and Exchange Act of 1934, granting unto
said attorney-in-fact and agent full power and authority to do and perform 
each and every act and thing requisite and necessary to be done in and about 
the same as fully to all intents and purposes as he might or could do in 
person, hereby ratifying and confirming all that said attorney-in-fact and 
agent or his substitute or substitutes, may lawfully do or cause to be done 
by virtue thereof.

          IN WITNESS WHEREOF, each of the undersigned has hereunto
 set his
hand on the date set opposite his name.

Signature                     Title                                 Date
- ---------                     -----                               --------
/s/ Joseph H. Lemieux         Chairman of the Board of             3/25/98
- -------------------------     Directors and Chief Executive       --------
Joseph H. Lemieux             Officer (Principal Executive
                              Officer); Director

/s/ Lee A. Wesselmann         Senior Vice President                3/25/98
- -------------------------     and Chief Financial Officer         --------
Lee A. Wesselmann             (Principal Financial and  
                              Accounting Officer); Director

/s/ Robert J. Lanigan         Director                             3/26/98
- -------------------------                                         --------
Robert J. Lanigan            

/s/ Robert J. Dineen          Director                             3/25/98
- -------------------------                                         --------
Robert J. Dineen

/s/ Edward A. Gilhuly         Director                             3/26/98
- -------------------------                                         --------
Edward A. Gilhuly

/s/ James H. Greene, Jr.      Director                             3/26/98
- -------------------------                                         --------
James H. Greene, Jr.



<PAGE>
Signature                     Title                                Date
- ---------                     -----                              --------
/s/ Henry R. Kravis           Director                            3/26/98
- -------------------------                                        --------
Henry R. Kravis

                              Director                            
- -------------------------                                        --------
Robert I. MacDonnell

/s/ John J. McMackin, Jr.     Director                            3/25/98
- -------------------------                                        --------
John J. McMackin, Jr.       

/s/ Michael W. Michelson      Director                            3/26/98
- -------------------------                                        --------
Michael W. Michelson

/s/ George R. Roberts         Director                            3/26/98
- -------------------------                                        --------
George R. Roberts




































<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1997 consolidated balance sheet, and the consolidated results
of operations for the year then ended and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                     234,300,000
<SECURITIES>                                         0
<RECEIVABLES>                              681,600,000
<ALLOWANCES>                                52,900,000
<INVENTORY>                                592,400,000
<CURRENT-ASSETS>                         1,648,300,000
<PP&E>                                   4,105,100,000
<DEPRECIATION>                           1,699,700,000
<TOTAL-ASSETS>                           6,845,100,000
<CURRENT-LIABILITIES>                    1,043,800,000
<BONDS>                                  3,216,800,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                 20,400,000
<COMMON>                                     1,400,000
<OTHER-SE>                               1,320,100,000
<TOTAL-LIABILITY-AND-EQUITY>             6,845,100,000
<SALES>                                  4,658,500,000
<TOTAL-REVENUES>                         4,828,400,000
<CGS>                                    3,666,400,000
<TOTAL-COSTS>                            3,666,400,000
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                            51,300,000
<INTEREST-EXPENSE>                         302,700,000
<INCOME-PRETAX>                            452,300,000
<INCOME-TAX>                               148,500,000
<INCOME-CONTINUING>                        272,400,000
<DISCONTINUED>                                       0
<EXTRAORDINARY>                          (104,500,000)
<CHANGES>                                            0
<NET-INCOME>                               167,900,000
<EPS-PRIMARY>                                     1.25
<EPS-DILUTED>                                     1.24
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1997, June 30, 1997, and September 30, 1997 condensed consoli-
dated balance sheets, and the condensed consolidated results of operations
for the three, six, and nine-month periods then ended, respectively, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED> 
       
<S>                             <C>                     <C>                     <C>
<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
<CASH>                                     289,800,000             305,800,000             277,000,000
<SECURITIES>                                         0                       0                       0
<RECEIVABLES>                              659,000,000             727,800,000             715,700,000
<ALLOWANCES>                                37,700,000              36,600,000              41,000,000
<INVENTORY>                                626,800,000             621,600,000             579,200,000
<CURRENT-ASSETS>                         1,701,100,000           1,781,200,000           1,700,200,000
<PP&E>                                   3,732,300,000           3,797,600,000           3,866,300,000
<DEPRECIATION>                           1,548,400,000           1,603,500,000           1,651,100,000
<TOTAL-ASSETS>                           6,695,100,000           6,825,700,000           6,786,800,000
<CURRENT-LIABILITIES>                    1,051,600,000           1,081,900,000           1,004,200,000
<BONDS>                                  3,458,400,000           3,161,000,000           3,241,900,000
<PREFERRED-MANDATORY>                                0                       0                       0
<PREFERRED>                                 21,400,000              21,400,000              21,400,000
<COMMON>                                     1,200,000               1,400,000               1,400,000
<OTHER-SE>                                 734,700,000           1,207,000,000           1,266,200,000
<TOTAL-LIABILITY-AND-EQUITY>             6,695,100,000           6,825,700,000           6,786,800,000
<SALES>                                  1,056,300,000           2,280,800,000           3,520,300,000
<TOTAL-REVENUES>                         1,116,200,000           2,373,900,000           3,653,200,000
<CGS>                                      844,900,000           1,774,600,000           2,736,000,000
<TOTAL-COSTS>                              844,900,000           1,774,600,000           2,736,000,000
<OTHER-EXPENSES>                                     0                       0                       0
<LOSS-PROVISION>                                     0                       0                       0
<INTEREST-EXPENSE>                          85,900,000             167,300,000             237,100,000
<INCOME-PRETAX>                             84,400,000             233,000,000             383,900,000
<INCOME-TAX>                                23,400,000              74,200,000             125,700,000
<INCOME-CONTINUING>                         54,600,000             141,500,000             233,300,000
<DISCONTINUED>                                       0                       0                       0
<EXTRAORDINARY>                                      0            (84,500,000)           (100,900,000)
<CHANGES>                                            0                       0                       0
<NET-INCOME>                                54,600,000              57,000,000             132,400,000
<EPS-PRIMARY>                                     0.44                    0.44                    1.00
<EPS-DILUTED>                                     0.44                    0.44                    0.99
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1996 consolidated balance sheet, and the consolidated results
of operations for the year then ended and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED> 
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1996
<PERIOD-END>                               DEC-31-1996
<CASH>                                     175,300,000
<SECURITIES>                                         0
<RECEIVABLES>                              488,800,000
<ALLOWANCES>                                40,600,000
<INVENTORY>                                494,600,000
<CURRENT-ASSETS>                         1,285,100,000
<PP&E>                                   3,435,900,000
<DEPRECIATION>                           1,494,300,000
<TOTAL-ASSETS>                           6,105,300,000
<CURRENT-LIABILITIES>                      904,900,000
<BONDS>                                  3,287,900,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                 21,400,000
<COMMON>                                     1,200,000
<OTHER-SE>                                 707,100,000
<TOTAL-LIABILITY-AND-EQUITY>             6,105,300,000
<SALES>                                  3,845,700,000
<TOTAL-REVENUES>                         3,976,200,000
<CGS>                                    3,025,600,000
<TOTAL-COSTS>                            3,025,600,000
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                            38,500,000
<INTEREST-EXPENSE>                         302,600,000
<INCOME-PRETAX>                            324,100,000
<INCOME-TAX>                               104,900,000
<INCOME-CONTINUING>                        191,100,000
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                               191,100,000
<EPS-PRIMARY>                                     1.58
<EPS-DILUTED>                                     1.55
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 31, 1996, June 30, 1996, and September 30, 1996 condensed consoli-
dated balance sheets, and the condensed consolidated results of operations
for the three, six, and nine-month periods then ended, respectively, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED> 
       
<S>                             <C>                     <C>                     <C>
<PERIOD-TYPE>                   3-MOS                   6-MOS                   9-MOS
<FISCAL-YEAR-END>                          DEC-31-1996             DEC-31-1996             DEC-31-1996
<PERIOD-END>                               MAR-31-1996             JUN-30-1996             SEP-30-1996
<CASH>                                     142,600,000             120,400,000             125,100,000
<SECURITIES>                                         0                       0                       0
<RECEIVABLES>                              468,200,000             469,100,000             478,700,000
<ALLOWANCES>                                36,700,000              36,500,000              36,900,000
<INVENTORY>                                513,400,000             489,300,000             494,400,000
<CURRENT-ASSETS>                         1,223,800,000           1,165,800,000           1,210,700,000
<PP&E>                                   3,144,700,000           3,262,800,000           3,345,400,000
<DEPRECIATION>                           1,344,400,000           1,394,500,000           1,450,700,000
<TOTAL-ASSETS>                           5,451,800,000           5,474,500,000           5,566,800,000
<CURRENT-LIABILITIES>                      889,600,000             849,700,000             955,000,000
<BONDS>                                  2,777,000,000           2,813,900,000           2,770,200,000
<PREFERRED-MANDATORY>                                0                       0                       0
<PREFERRED>                                 21,600,000              21,600,000              21,600,000
<COMMON>                                     1,200,000               1,200,000               1,200,000
<OTHER-SE>                                 547,300,000             608,900,000             673,500,000
<TOTAL-LIABILITY-AND-EQUITY>             5,451,800,000           5,474,500,000           5,566,800,000
<SALES>                                    905,800,000           1,869,500,000           2,883,600,000
<TOTAL-REVENUES>                           936,800,000           1,932,500,000           2,975,500,000
<CGS>                                      708,900,000           1,446,400,000           2,234,700,000
<TOTAL-COSTS>                              708,900,000           1,446,400,000           2,234,700,000
<OTHER-EXPENSES>                                     0                       0                       0
<LOSS-PROVISION>                                     0                       0                       0
<INTEREST-EXPENSE>                          73,500,000             148,300,000             225,000,000
<INCOME-PRETAX>                             74,400,000             187,300,000             287,700,000
<INCOME-TAX>                                25,900,000              65,200,000              97,900,000
<INCOME-CONTINUING>                         39,600,000             106,200,000             168,200,000
<DISCONTINUED>                                       0                       0                       0
<EXTRAORDINARY>                                      0                       0                       0
<CHANGES>                                            0                       0                       0
<NET-INCOME>                                39,600,000             106,200,000             168,200,000
<EPS-PRIMARY>                                     0.33                    0.88                    1.39
<EPS-DILUTED>                                     0.32                    0.86                    1.36
        

</TABLE>






<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
December 31, 1995 consolidated balance sheet, and the consolidated results
of operations for the year then ended and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<RESTATED> 
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1995
<PERIOD-END>                               DEC-31-1995
<CASH>                                     161,900,000
<SECURITIES>                                         0
<RECEIVABLES>                              423,900,000
<ALLOWANCES>                                39,700,000
<INVENTORY>                                502,200,000
<CURRENT-ASSETS>                         1,216,800,000
<PP&E>                                   3,087,200,000
<DEPRECIATION>                           1,302,400,000
<TOTAL-ASSETS>                           5,439,200,000
<CURRENT-LIABILITIES>                      888,900,000
<BONDS>                                  2,780,600,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                 21,900,000
<COMMON>                                     1,200,000
<OTHER-SE>                                 508,800,000
<TOTAL-LIABILITY-AND-EQUITY>             5,439,200,000
<SALES>                                  3,763,200,000
<TOTAL-REVENUES>                         3,881,000,000
<CGS>                                    2,948,500,000
<TOTAL-COSTS>                            2,948,500,000
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                            32,400,000
<INTEREST-EXPENSE>                         299,600,000
<INCOME-PRETAX>                            310,000,000
<INCOME-TAX>                               100,800,000
<INCOME-CONTINUING>                        169,100,000
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                               169,100,000
<EPS-PRIMARY>                                     1.40
<EPS-DILUTED>                                     1.37
        

</TABLE>