Abstract: A system for automatically compensating for changes in permanent magnetism in a vehicle in which a flux-gate compass is installed. Calibration is initially performed by rotating the vehicle through a full circle and determining from the flux-gate outputs the degree of distortion suffered by an ideally circular performance characteristic. Subsequent flux-gate readings are compensated in accordance with parameters generated during calibration. Parameters relating to offset or displacement of the characteristic are automatically and continually updated to compensate for changes in permanent magnetism of the vehicle, such as might be caused by loading or unloading the vehicle.