SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    Form 10-Q

(Mark One)

     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
          ENDED SEPTEMBER 30, 2000 OR

     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
          SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
          FROM _______________ TO _______________


          Commission file number 1-2199


                           ALLIS-CHALMERS CORPORATION
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)


        Delaware                                               39-0126090
--------------------------------                           ------------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

      4180 Cherokee Drive
      Brookfield, Wisconsin                                       53045
---------------------------------------                     ------------------
(Address of principal executive offices)                        (Zip code)


                                  (414)475-2000
               --------------------------------------------------
               Registrant's telephone number, including area code



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes _X_    No ___

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.    Yes _X_   No ___

At October 24, 2000 were 1,588,128 shares of Common Stock outstanding.

<PAGE>
2

PART I.  FINANCIAL INFORMATION
         ---------------------

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------------

STATEMENT OF OPERATIONS
-----------------------


                                       Three Months Ended     Nine Months Ended
                                         September 30            September 30
                                      -------------------    ------------------
                                        2000       1999        2000      1999
                                      --------   --------    --------  --------
                                             (Thousands, except per share)

Sales                                  $   909    $   894     $ 3,331   $ 3,030
Cost of sales                              738        682       2,455     2,230
                                       -------    -------     -------   -------

   Gross Margin                            171        212         876       800

Marketing and administrative expense       285        326       1,064     1,097
                                       -------    -------     -------   -------

   Loss from Operations                   (114)      (114)       (188)     (297)

Other income (expense)
   Interest income                           3          2           5         5
   Interest expense                        (12)       (10)        (27)      (25)
   Other                                     0          0           0         1
                                       -------    -------     -------   -------


   Net Income/(Loss)                   $  (123)   $  (122)   $   (210) $   (316)
                                       =======    =======     =======   =======

   Net Income/(Loss) per Common Share  $  (.08)   $  (.08)   $   (.13) $   (.20)
                                       =======    =======    ========  ========



                        STATEMENT OF ACCUMULATED DEFICIT

                       Nine Months Ended September 30           2000      1999
                       ------------------------------         -------   -------
                                                                  (thousands)

Accumulated deficit - beginning of year                      $(75,786) $(75,673)
Net income/(loss)                                                (210)     (316)
                                                             --------   -------
Accumulated deficit - September 30                           $(75,996) $(75,989)
                                                             ========  ========


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.

<PAGE>

                                                                               3

ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------------

STATEMENT OF FINANCIAL CONDITION
--------------------------------

                                                  September 30,  December 31,
                                                      2000          1999
                                                  -------------  -------------
                                                         (thousands)
Assets
------

Cash and short-term investments                    $     131      $     501
Trade receivables, net                                   642            570
Inventories, net                                         199            157
Other current assets                                      43             66
                                                   ---------      ---------

       Total Current Assets                            1,015          1,294

Net property, plant and equipment                      1,066          1,170
                                                   ---------      ---------

       Total Assets                                $   2,081      $   2,464
                                                   =========      =========

Liabilities and Shareholders' Deficit
-------------------------------------

Current maturities of long-term debt               $      19      $      60
Trade accounts payable                                   173            461
Accrued employee benefits                                145            120
Accrued pension liability                             66,877         66,877
Other current liabilities                                104            281
                                                   ---------      ---------

       Total Current Liabilities                      67,318         67,799

Accrued postretirement benefit obligations               913            927
Long-term debt                                           515            193

Shareholders' deficit
  Common stock, ($.15 par value, authorized
   2,000,000 shares, outstanding 1,003,028
   at September 30, 1999 and December 31, 1998)          238            238
  Capital in excess of par value                       9,093          9,093
  Accumulated deficit (accumulated deficit of
   $424,208 eliminated on December 2, 1988)          (75,996)       (75,786)
                                                   ---------      ---------

       Total Shareholders' Deficit                   (66,665)       (66,455)

       Total Liabilities and Shareholders'
        Deficit                                    $   2,081      $   2,464
                                                   =========      =========


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.

<PAGE>
4

ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES
--------------------------------------------------------

STATEMENT OF CASH FLOWS
-----------------------
<TABLE>
<CAPTION>
                                                                 Nine Months Ended
                                                                    September 30
                                                              -----------------------
                                                                 2000           1999
                                                              ---------     ---------
                                                                     (thousands)

Cash flows from operating activities:
<S>                                                           <C>           <C>
  Net income/(loss)                                           $    (210)    $    (316)
  Adjustments to reconcile net loss to net cash
    (used) provided by operating activities:
      Depreciation and amortization                                 111           125
      Gain on sale of fixed assets                                    0             0
      Change in working capital:
        (Increase) decrease in receivables, net                     (72)          134
        Increases in inventories                                    (42)           (2)
        Decrease in trade accounts payable                         (288)          (51)
        (Increase) decrease in other current items                 (129)           36
        Decrease in accrued pension liability, net                    0             0
      Other                                                         (14)          (29)
                                                              ---------     ---------

        Net cash (used) by operating activities                    (644)         (103)

Cash flows from investing activities:
  Capital expenditures                                               (7)          (52)
  Proceeds from sale of equipment                                     0            15
                                                              ---------     ---------

        Net cash (used) by investing activities                      (7)          (37)

Cash flows from financing activities:
  Net proceeds from issuance of long-term debt                      329            29
  Payment of long-term debt                                         (48)          (54)
                                                              ---------     ---------

        Net cash provided (used) by financing activities            281           (25)
                                                              ---------     ---------

Net decrease in cash and short-term
 investments                                                       (370)         (165)

Cash and short-term investments at
 beginning of period                                                501           223
                                                              ---------     ---------

Cash and short-term investments at
 end of period                                                $     131     $      58
                                                              =========     =========

Supplemental information - interest paid                      $      27     $      25
                                                              =========     =========
</TABLE>


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.

<PAGE>

                                                                               5

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ACCOUNTING POLICIES

This interim financial data should be read in conjunction with the consolidated
financial statements and related notes, management's discussion and analysis and
other information included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.

All adjustments considered necessary for a fair presentation of the results of
operations have been included in the unaudited financial statements. The results
of operations for any interim period are not necessarily indicative of
Allis-Chalmers operating results for a full year.

NOTE 2 - POSTRETIREMENT OBLIGATIONS--PENSION PLAN

In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Allis-Chalmers Consolidated Pension Plan (Consolidated Plan). Primarily as a
result of the changes in mortality assumptions to reflect decreased mortality
rates of the Company's retirees, the Consolidated Plan was underfunded on a
present value basis. In the first quarter of 1996, the Company made a required
cash contribution to the Consolidated Plan in the amount of $205,000. The
Company did not, however, have the financial resources to make the other
required payments during 1996 and 1997. Given the inability of the Company to
fund such obligations with its current financial resources, in February 1997,
Allis-Chalmers applied to the Pension Benefit Guaranty Corporation (PBGC) for a
"distress" termination of the Consolidated Plan under section 4041(c) of the
Employee Retirement Income Security Act of 1974, as amended (ERISA). The PBGC
approved the distress termination application in September 1997 and agreed to a
plan termination date of April 14, 1997. The PBGC became trustee of the
terminated Consolidated Plan on September 30, 1997.

Upon termination of the Consolidated Plan, Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis-Chalmers and its subsidiaries also have a
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
funding deficiencies (together, the PBGC Liability) total approximately $67.9
million. Effective March 31, 1999, the Company issued 585,100 shares reducing
the pension liability by the estimated fair market value of the shares to $66.9
million.

In September 1997, Allis-Chalmers and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated funding deficiency under
a plan like the Consolidated Plan. Section 4971(b) of the Code imposes an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected" within a specified period. Liability for
the taxes imposed under section 4971

<PAGE>

6

extends, jointly and severally, to the Company and to its commonly-controlled
subsidiary corporations.

Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code section 4971(a) of
approximately $900,000.

On July 16, 1998, the Company and the Internal Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability under Code Section
4971 for $75,000. Following final IRS approval, payment of this amount was made
on August 11, 1998.

In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into an agreement for the settlement of the PBGC Liability (the PBGC
Agreement).

Pursuant to the terms of the PBGC Agreement, the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding on a fully-diluted basis, and the Company has a right of first
refusal with respect to the sale of the shares of common stock owned by the
PBGC. In conjunction with the share issuance, the Company reduced the pension
liability to the PBGC based on the estimated fair market value of the shares
issued on the effective date of March 31, 1999. In accordance with the terms of
the PBGC Agreement, the Company was required to and has (i) decreased the size
of the Board of Directors of the Company (the Board) to seven members; (ii)
caused a sufficient number of then current directors of the Company to resign
from the Board and all committees thereof; and (iii) caused Thomas M. Barnhart,
II, Alexander P. Sammarco and David A. Groshoff, designees of the PBGC, to be
elected to the Board. The PBGC has caused the Company to amend its By-laws
(By-laws) to conform to the terms of the PBGC Agreement. Furthermore, the
Company agreed to pay the PBGC's reasonable professional fees on the 90th day
after a Release Event (as hereinafter defined), which is currently evidenced by
a Company promissory note in favor of the PBGC in the amount of $75,000. During
the term of the PBGC Agreement, the Company has agreed not to issue or agree to
issue any common stock of the Company or any "common stock equivalent" for less
than fair value (as determined by a majority of the Board). The Company also
agreed not to merge or consolidate with any other entity or sell, transfer or
convey more than 50% of its property or assets without majority Board approval
and agreed not to amend its Amended and Restated Certificate of Incorporation
(Certificate) or By-laws.

In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million (Release Event). If the 585,100 shares are disposed of by the PBGC
prior to a Release Event and the final satisfaction and discharge of the PBGC
Liability, the liability will be accreted by the estimated fair market value,
$1,024,000, of the shares issued to the PBGC.

<PAGE>

                                                                               7

In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company and PBGC (the Registration Rights Agreement); and (ii) a Lock-Up
Agreement by and among the Company, the PBGC, AL-CH Company, L.P., a Delaware
limited partnership (AL-CH), Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers Corporation (the UAW Trust), and Firstar Trust Company, as
trustee under that certain Amended and Restated Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers Corporation (the Non-UAW Trust)
(the Lock-Up Agreement).

The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the Securities Act of 1933, as amended, on
demand or incidental to a registration statement being filed by the Company. In
order to demand registration of Registrable Shares, a request for registration
by holders of not less than 20% of the Registrable Shares is necessary. The
Company may deny a request for registration of such shares if the Company
contemplates filing a registration statement within 90 days of receipt of notice
from the holders. The Registration Rights Agreement also contains provisions
that allow the Company to postpone the filing of any registration statement for
up to 180 days. The Registration Rights Agreement contains indemnification
language similar to that usually contained in agreements of this kind.

The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW
Trust.

Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and ending on the third anniversary of
the Release Event, it will not, directly or indirectly, sell, transfer, assign
or dispose of any shares of Company stock it beneficially owns. Commencing with
the third anniversary of the Release Event and continuing until the fifth
anniversary of the Release Event, each of AL-CH, the UAW Trust and the Non-UAW
Trust agreed not to sell, transfer or dispose of any shares of Company stock
without first giving the PBGC an opportunity to sell all or any portion of the
shares of Company stock the PBGC owns. The foregoing right of the PBGC applies
to the sale of Company stock in a public offering or otherwise.

The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party

<PAGE>
8


further agreed that it will vote all of its shares (i) in favor of certain
specified amendments to the Company's Certificate, (ii) for the election of the
persons designated by the PBGC (each, a PBGC Director) to serve on the Board and
(iii) in favor of the election of Company directors who are committed to cause,
and who do cause, one PBGC Director to be appointed to the Nominating Committee
of the Board and one PBGC Director to be appointed as the Chairman of the
Compensation Committee of the Board.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------

Results of Operations

Operations of the Company consist of Houston Dynamic Service, Inc. (HDS), the
Company's machinery repair and service subsidiary.

Sales in the third quarter of 2000 totaled $909,000 a slight increase from
$894,000 in the third quarter of 1999.

Gross margin, as a percentage of sales, was 19% in the third quarter of 2000, a
decrease from 24% in 1999 due to the competitive nature of the business.

Marketing and administrative expense was $285,000 in the third quarter of 2000
compared with $326,000 in the prior year. A significant portion of the Company's
administrative expenses relates to expenses for Securities and Exchange
Commission and other governmental reporting as well as legal, accounting and
audit, tax, insurance and other corporate requirements of a publicly held
company.

The Company incurred a net loss of $123,000, or $.08 per common share, in the
third quarter of 2000 compared with a net loss of $122,000, or $.08 per common
share, in the same period of 1999.

In the first nine months of 2000, the Company incurred a net loss of $210,000,
or $.14 per common share, compared with a net loss of $316,000, or $.20 per
common share, in the same period of 1999.

Financial Condition and Liquidity

Cash and short term investments totaled $131,000 at September 30, 2000, a
decrease from $501,000 at December 31, 1999 due to lower sales, increased
receivables, increased inventory and a substantial reduction in trade accounts
payable..

Net trade receivables at September 30, 2000 were $642,000, reflecting an
increase from the December 31, 1999 level of $570,000. This increase was due to
the major portion of the sales being in the later part of the quarter.

<PAGE>

                                                                               9

Inventory at September 30, 2000 was $199,000, an increase from $157,000 at year
end 1999.

Net property, plant and equipment was $1,066,000 at September 30, 2000, a
decrease from $1,170,000 at year end 1999. There were no significant purchases
of capital items in the year 2000.

Trade accounts payable at September 30, 2000 were $173,000, a decrease from
$461,000 at December 31, 1999.

Other current liabilities were $104,000 at September 30, 2000, a decrease from
$281,000 at December 31, 1999. This was due to a reversal of a legal reserve in
the amount of $128,000.

Long term debt was $515,000 at September 30, 2000, an increase from $193,000 at
December 31, 1999. This increase resulted from the Company's Board of Directors
decision to establish an arrangement by which to compensate former and
continuing Board members who had served from 1989 to March 31, 1999 without
compensation. The Company issued promissory notes in the amount of $25,000 each
to seven current or former directors and $150,000 to John T. Grigsby, Jr. a
former director and current Executive Vice President and Chief Financial
Officer. The notes bear interest at the rate of five percent (5%) and are due
March 28, 2005, however, may be prepaid at any time at the discretion of the
Company. In addition, the notes are canceled in the event of a subsequent
bankruptcy of the Company.

In addition, the Board granted options to purchase 2,000 shares of the Company's
common stock to the seven directors and an option to purchase 10,000 shares to
Mr. Grigsby. The option price was determined to be $2.75 per share. The options
vested immediately and may be exercised any time prior to March 28, 2010.

The A-C Reorganization Trust, pursuant to the Plan of Reorganization, funds all
costs incurred by Allis-Chalmers which relate to implementation of the Plan of
Reorganization, thus avoiding additional demands on the liquidity of the
Company. Such costs include an allocated share of certain expenses for Company
employees, professional fees and certain other administrative expenses.

In 1994, the Company's independent pension actuaries changed the assumptions for
mortality and administrative expenses used to determine the liabilities of the
Consolidated Plan. Primarily as a result of the changes in mortality assumptions
to reflect decreased mortality rates of the Company's retirees, the Consolidated
Plan was underfunded on a present value basis. In the first quarter of 1996, the
Company made a required cash contribution to the Consolidated Plan in the amount
of $205,000. The Company did not, however, have the financial resources to make
the other required payments during 1996 and 1997. Given the inability of the
Company to fund such obligations with its current financial resources, in
February 1997, Allis-Chalmers applied to the PBGC for a "distress" termination
of the Consolidated Plan under section 4041(c) of ERISA. The PBGC approved the
distress termination application in September 1997 and agreed to a plan
termination date of April 14, 1997. The PBGC became trustee of the terminated
Consolidated Plan on September 30, 1997.

<PAGE>
10


Upon termination of the Consolidated Plan, Allis-Chalmers and its subsidiaries
incurred a liability to the PBGC for an amount equal to the Consolidated Plan's
unfunded benefit liabilities. Allis-Chalmers and its subsidiaries also have a
liability to the PBGC, as trustee of the terminated Consolidated Plan, for the
outstanding balance of the Consolidated Plan's accumulated funding deficiencies.
The PBGC has estimated that the unfunded benefit liabilities and the accumulated
funding deficiencies (together, the PBGC Liability) total approximately $67.9
million. Effective March 31, 1999, the Company issued 585,100 shares reducing
the pension liability by the estimated fair market value of the shares to $66.9
million.

In September 1997, Allis-Chalmers and the PBGC entered into an agreement in
principle for the settlement of the PBGC Liability which required, among other
things, satisfactory resolution of the Company's tax obligations with respect to
the Consolidated Plan under Section 4971 of the Internal Revenue Code of 1986,
as amended (Code). Section 4971(a) of the Code imposes, for each taxable year, a
first-tier tax of 10% on the amount of the accumulated funding deficiency under
a plan like the Consolidated Plan. Section 4971(b) of the Code imposes an
additional, second-tier tax equal to 100% of such accumulated funding deficiency
if the deficiency is not "corrected" within a specified period. Liability for
the taxes imposed under section 4971 extends, jointly and severally, to the
Company and to its commonly-controlled subsidiary corporations.

Prior to its termination, the Consolidated Plan had an accumulated funding
deficiency in the taxable years 1995, 1996, and 1997. Those deficiencies
resulted in estimated first-tier taxes under Code section 4971(a) of
approximately $900,000.

On July 16, 1998, the Company and the Internal Revenue Service (IRS) reached an
agreement in principal to settle the Company's tax liability under Code Section
4971 for $75,000. Following final IRS approval, payment of this amount was made
on August 11, 1998.

In June 1999, but effective as of March 31, 1999, the Company and the PBGC
entered into an agreement for the settlement of the PBGC Liability (the PBGC
Agreement).

Pursuant to the terms of the PBGC Agreement, the Company issued 585,100 shares
of its common stock to the PBGC, or 35% of the total number of shares issued and
outstanding on a fully-diluted basis, and the Company has a right of first
refusal with respect to the sale of the shares of common stock owned by the
PBGC. In conjunction with the share issuance, the Company reduced the pension
liability to the PBGC based on the estimated fair market value of the shares
issued on the effective date of March 31, 1999. In accordance with the terms of
the PBGC Agreement, the Company was required to and has (i) decreased the size
of the Board of Directors of the Company (the Board) to seven members; (ii)
caused a sufficient number of then current directors of the Company to resign
from the Board and all committees thereof; and (iii) caused Thomas M. Barnhart,
II, Alexander P. Sammarco and David A. Groshoff, designees of the PBGC, to be
elected to the Board. The PBGC has caused the Company to amend its By-laws
(By-laws) to conform to the terms of the PBGC Agreement. Furthermore, the
Company agreed to pay the PBGC's reasonable professional fees on the 90th day
after a Release Event (as hereinafter defined), which is currently evidenced by
a Company promissory note in favor of the

<PAGE>

                                                                              11

PBGC in the amount of $75,000. During the term of the PBGC Agreement, the
Company has agreed not to issue or agree to issue any common stock of the
Company or any "common stock equivalent" for less than fair value (as determined
by a majority of the Board). The Company also agreed not to merge or consolidate
with any other entity or sell, transfer or convey more than 50% of its property
or assets without majority Board approval and agreed not to amend its Amended
and Restated Certificate of Incorporation (Certificate) or By-laws.

In order to satisfy and discharge the PBGC Liability, the PBGC Agreement
provides that the Company must either: (i) receive, in a single transaction or
in a series of related transactions, debt financing which makes available to the
Company at least $10 million of borrowings or (ii) consummate an acquisition, in
a single transaction or in a series of related transactions, of assets and/or a
business where the purchase price (including funded debt assumed) is at least
$10 million (Release Event). If the 585,100 shares are disposed of by the PBGC
prior to a Release Event and the final satisfaction and discharge of the PBGC
Liability, the liability will be accreted by the estimated fair market value,
$1,024,000, of the shares issued to the PBGC.

In connection with the PBGC Agreement, and as additional consideration for
settling the PBGC Liability, the following agreements, each dated as of March
31, 1999 were also entered into: (i) a Registration Rights Agreement between the
Company and PBGC (the Registration Rights Agreement); and (ii) a Lock-Up
Agreement by and among the Company, the PBGC, AL-CH Company, L.P., a Delaware
limited partnership (AL-CH), Wells Fargo Bank, as trustee under that certain
Amended and Restated Retiree Health Trust Agreement for UAW Retired Employees of
Allis-Chalmers Corporation (the UAW Trust), and Firstar Trust Company, as
trustee under that certain Amended and Restated Retiree Health Trust Agreement
for Non-UAW Retired Employees of Allis-Chalmers Corporation (the Non-UAW Trust)
(the Lock-Up Agreement).

The Registration Rights Agreement grants each holder of Registrable Shares
(defined in the Registration Rights Agreement to basically mean the shares of
common stock issued to the PBGC under the PBGC Agreement) the right to have
their shares registered pursuant to the Securities Act of 1933, as amended, on
demand or incidental to a registration statement being filed by the Company. In
order to demand registration of Registrable Shares, a request for registration
by holders of not less than 20% of the Registrable Shares is necessary. The
Company may deny a request for registration of such shares if the Company
contemplates filing a registration statement within 90 days of receipt of notice
from the holders. The Registration Rights Agreement also contains provisions
that allow the Company to postpone the filing of any registration statement for
up to 180 days. The Registration Rights Agreement contains indemnification
language similar to that usually contained in agreements of this kind.

The Lock-Up Agreement governs the transfer and disposition of shares of the
Company's common stock and the voting of such shares, as well as grants the PBGC
a right of sale of its shares prior to AL-CH, the UAW Trust and the Non-UAW
Trust.

Pursuant to the Lock-Up Agreement, unless the Board has terminated the common
stock transfer restrictions set forth in Article XIII of the Company's
Certificate, AL-CH, the UAW Trust and the Non-UAW Trust each agreed that, during
the period commencing on March 31, 1999 and

<PAGE>

12


ending on the third anniversary of the Release Event, it will not, directly or
indirectly, sell, transfer, assign or dispose of any shares of Company stock it
beneficially owns. Commencing with the third anniversary of the Release Event
and continuing until the fifth anniversary of the Release Event, each of AL-CH,
the UAW Trust and the Non-UAW Trust agreed not to sell, transfer or dispose of
any shares of Company stock without first giving the PBGC an opportunity to sell
all or any portion of the shares of Company stock the PBGC owns. The foregoing
right of the PBGC applies to the sale of Company stock in a public offering or
otherwise.

The Lock-Up Agreement also contains a voting component. During the term of the
Lock-Up Agreement, each party to the agreement agreed to vote, at any meeting of
the Company stockholders and in any written consent, all shares of Company stock
owned by it in favor of the election as directors of the Company the persons
nominated by the Nominating Committee of the Board and to refrain from taking
any action contrary to or inconsistent with such obligation. During the term of
the Lock-Up Agreement, each party to the agreement further agreed not to vote
its shares of Company stock or take any other action to amend the Company's
Certificate or By-laws in a manner that is inconsistent with, or in breach of,
the PBGC Agreement. Each party further agreed that it will vote all of its
shares (i) in favor of certain specified amendments to the Company's
Certificate, (ii) for the election of the persons designated by the PBGC (each,
a PBGC Director) to serve on the Board and (iii) in favor of the election of
Company directors who are committed to cause, and who do cause, one PBGC
Director to be appointed to the Nominating Committee of the Board and one PBGC
Director to be appointed as the Chairman of the Compensation Committee of the
Board.

The Environmental Protection Agency (EPA) and certain state environmental
protection agencies have requested information in connection with several
potential hazardous waste disposal sites in which products manufactured by
Allis-Chalmers before consummation of the Plan of Reorganization were disposed.
The EPA has claimed that Allis-Chalmers is liable for cleanup costs associated
with several additional sites. In addition, certain third parties have asserted
that Allis-Chalmers is liable for cleanup costs or associated EPA fines in
connection with additional sites. In each instance the environmental claims
asserted against the Company involve its prebankruptcy operations. Accordingly,
Allis-Chalmers has taken the position that all cleanup costs or other
liabilities related to these sites were discharged in the bankruptcy. No
environmental claims have been asserted against the Company involving its
postbankruptcy operations.

The Company's principal sources of cash include earnings from the operations of
HDS. The cash requirements needed for the administrative expenses associated
with being a publicly held company are significant, and the Company will
continue to use cash generated by operations to fund such expenses.

The necessity to assure liquidity emphasizes the need for the Company to
continue in a prudent manner its search for appropriate acquisition candidates
in order to increase the Company's operating base and generate positive cash
flow. If no acquisition candidate is found and HDS' sales continue to encounter
sporadic soft market conditions, it is likely that the Company will run out of
cash in the near term.

<PAGE>

                                                                              13


PART II.  OTHER INFORMATION
          -----------------

ITEM 1. LEGAL PROCEEDINGS
-------------------------

See PART I. Item 2, "Management's Discussion and Analysis."


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
----------------------------------------

(a) Exhibits:  (27) - Financial Data Schedule

(b) Reports on Form 8-K - No report on Form 8-K was filed during the third
quarter of 2000.


                                    SIGNATURE
                                    ---------

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.

                                          Allis-Chalmers Corporation
                                          --------------------------
                                                 (Registrant)



                                           /s/ John T. Grigsby, Jr.
                                          ------------------------------
                                          John T. Grigsby, Jr.
                                          Executive Vice President and
                                           Chief Financial Officer

November 13, 2000