1
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549



                             Form 8-K



             Pursuant to Section 13 or 15(d) of the 
                 Securities Exchange Act of 1934




Date of Report (Date of earliest event reported): January 19,1999


                       Donnelly Corporation
      (Exact name of Registrant as specified in its charter)


       Michigan               I-9716                38-0493110
 (State or other       (Commission File No.)    (IRS Employer
  jurisdiction                                   Identification No.)
  of incorporation)

49 West Third Street, Holland, Michigan           49423-2813
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code: (616)786-7000


 2

Item 2.  Acquisition or Disposition of Assets

Effective, January 4, 1999, Donnelly Optics Corporation 
("Optics"), a wholly-owned subsidiary of the Registrant, was 
merged into Optics Acquisition, Inc. ("Acquisition"), a wholly-
owned subsidiary of Applied Image Group, Inc. ("AIG"), a New 
York Corporation.  The surviving corporation in this merger was 
Optics and its name was changed to Applied Optics, Inc. 
("AOI").  Donnelly Optics Corporation designed and manufactured 
injection molded optical lenses for the automotive, computer and 
medical industries.  Applied Image Group develops and 
manufactures opto-imaging products for the lighting, automotive, 
optical and photonics industries.

The transaction was effected pursuant to an Agreement and Plan of 
Merger ("Merger Agreement") dated as of December 1, 1998, among 
the Registrant, Optics, Acquisition and AIG.  The effective date 
of the merger was January 4, 1999.

Pursuant to the Merger Agreement, the Registrant received a 
$5,000,000 convertible subordinated promissory note ("Note") of 
AOI, guaranteed by AIG, and 13% of the outstanding AIG common 
stock.  The Note provides that interest shall begin to accrue at 
6% on January  4, 2002, with interest-only payments due each 
quarter beginning April 4, 2002, and the entire principal amount 
due January 3, 2009.  The Note is convertible at anytime into 
shares of AIG common stock.  Upon such conversion, in the full 
principal amount of the Note, Donnelly would hold approximately 
17% of the outstanding common stock of AIG.  As a result of this 
transaction, the financial results, assets and liabilities of 
Optics have been removed from the Registrant's financial 
statements as of December 1, 1998,  and were replaced on the 
Registrant's balance sheet by the 13% equity interest in AIG and 
the $5,000,000 Note.

The terms of the Merger Agreement and the establishment of the 
merger consideration were arrived at as a result of arm's length 
negotiations between the management of the Registrant and the 
management of AIG.  There are no material relationships between 
the Registrant and AIG or any of their respective affiliates, 
directors, officers or associates of any such directors or 
officers.

Item 7.  Financial Statements, Pro Forma Financial Information
         and Exhibits

(b)  Pro Forma Financial Information

At this time of this report, it is not practicable to 
provide pro forma financial statements.  Such 
statements will be filed under cover of Form 8 as soon 
as practicable and not later than February 28, 1999.

(c) Exhibits

Agreement and Plan of Merger among Applied Image Group, 
Inc., Optics Acquisition, Inc. Donnelly Corporation, 
Donnelly Optics Corporation and Bruno Glavich.


 3
                           Signatures

Pursuant to the requirements of the Securities Exchange Act of 
1934, the Registrant has duly caused this report to be signed on 
its behalf by the undersigned thereunto duly authorized.

Date:  January 19, 1999






DONNELLY CORPORATION
(Registrant)


- ------------------------------
/s/ Scott E. Reed
Senior Vice President, Chief Financial Officer