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This paper describes work aimed at the development of toughened granular fiber reinforced phenolic molding compounds for use in high speed injection molding processes for the automotive industry. Two aspects of toughening were investigated, resin modification and fiber length and type. A proprietary impact modifier was studied to determine the effect of modifier level and glass fiber level on the toughness and flexural properties of short glass reinforced phenolic composites. To determine the effect of fiber length and type, a new proprietary compounding technique was developed to produce granular molding materials with fiber lengths previously attainable only in bulk molding compounds. New toughened phenolic composites were developed based on these studies and are compared to commercial composites based on unmodified and rubber toughened phenolic resins.