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
                  MARCH 31, 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 May 5, 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
                                                  March 31
                                          --------------------------
                                              2000           1999
                                           --------        --------
                                         (thousands, except per share)

Sales                                       $   824        $ 1,052
Cost of sales                                   629            713
                                            -------        -------

    Gross Margin                                195            339

Marketing and administrative expense            295            390
                                            -------        -------

    Loss from Operations                       (100)           (51)
                                            -------        -------

Other income (expense)
   Interest income                                2              1
   Interest expense                              (6)            (8)
  Other                                           0              1
                                            -------        -------

    Net Loss                                $  (104)       $   (57)
                                            =======        =======

    Net Loss per Common Share               $  (.07)       $  (.06)
                                            =======        =======


                        STATEMENT OF ACCUMULATED DEFICIT

   Three Months Ended March 31                2000           1999
   ---------------------------               -------        -------
                                                    (thousands)

Accumulated deficit - beginning of year     $ (75,786)     $ (75,673)
Net loss                                         (104)           (57)
                                            ---------      ---------
Accumulated deficit - March 31              $ (75,890)     $ (75,730)
                                            =========      =========


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

                                                   March 31,      December 31,
                                                      2000          1999
                                                          (thousands)
Assets

Cash and short-term investments                    $     230          $     501
Trade receivables, net                                   534                570
Inventories, net                                         184                157
Other current assets                                      41                 66
                                                   ---------          ---------

       Total Current Assets                              989              1,294

Net property, plant and equipment                      1,129              1,170
                                                   ---------          ---------

       Total Assets                                $   2,118          $   2,464
                                                   =========          =========


Liabilities and Shareholders' Deficit

Current maturities of long-term debt               $      52          $      60
Trade accounts payable                                   207                461
Accrued employee benefits                                157                120
Accrued pension liability                             66,877             66,877
Other current liabilities                                270                281
                                                   ---------          ---------

       Total Current Liabilities                      67,563             67,799

Accrued postretirement benefit obligations               930                927
Long-term debt                                           184                193

Shareholders' deficit
  Common stock, ($.15 par value,
   authorized 2,000,000 shares, outstanding
   1,588,128 at March 31, 2000 and 1,003,028
   at December 31, 1999)                                 238                238
  Capital in excess of par value                       9,093              9,093
  Accumulated deficit (accumulated deficit of
   $424,208 eliminated on December 2, 1988)          (75,890)           (75,786)
                                                   ---------          ---------

       Total Shareholders' Deficit                   (66,559)           (66,455)
                                                   ---------          ---------

       Total Liabilities and Shareholders'
        Deficit                                    $   2,118          $   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

                                                    Three Months Ended
                                                          March 31
                                                     2000          1999
                                                         (thousands)

Cash flows from operating activities:
  Net loss                                        $  (104)       $   (57)
  Adjustments to reconcile net loss
    to net cash (used) provided by
    operating activities:
      Depreciation and amortization                    41             42
      Change in working capital:
        Decrease in receivables, net                   36            192
        Increase in inventories                       (27)          (145)
        Decrease in trade accounts payable           (254)           (66)
        Increase in other current items                51             78
      Other                                             3             (18)
                                                  -------        --------

        Net cash (used) provided by
           operating activities                      (254)            26

Cash flows from investing activities:
  Capital expenditures                                  0            (39)

Cash flows from financing activities:
  Net proceeds from issuance of
   long-term debt                                       0             29
  Payment of long-term debt                           (17)           (17)
                                                  -------        -------

        Net cash (used) provided by
          financing activities                        (17)            12
                                                  -------        -------

Net (decrease) in cash and cash equivalents          (271)            (1)

Cash and cash equivalents at
  beginning of period                                 501            223
                                                  -------        -------

Cash and cash equivalents at end of period        $   230        $   222
                                                  =======        =======

Supplemental information - interest paid          $     6        $     8
                                                  =======        =======


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  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.

<PAGE>
6


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.

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


<PAGE>
                                                                               7

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  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 first quarter of 2000 totaled  $824,000 a decrease from  $1,052,000
in the first quarter of 1999.  HDS  continues to be affected by volatile  market
conditions  that  prevail in the oil  related  fields of  refining,  processing,
chemicals and petrochemical operations throughout the Gulf Coast.

<PAGE>
8


Gross margin,  as a percentage of sales, was 23.7% in the first quarter of 2000,
a decrease from 32.2% in 1999 due to the lower sales, fixed cost and competitive
pricing.

Marketing and  administrative  expense was $295,000 in the first quarter of 2000
compared with $390,000 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 $104,000,  or $.07 per common share,  in the
first quarter of 2000 compared with a loss of $57,000, or $.06 per common share,
in the same period of 1999.

Financial Condition and Liquidity

Cash and short term  investments  totaled $230,000 at March 31, 2000, a decrease
from $501,000 at December 31, 1999.

Net trade  receivables  at March 31,  2000 were  $534,000,  reflecting  a slight
decrease from the December 31, 1999 level of $570,000, due to lower sales in the
first three months of 2000.

Inventory at March 31, 2000 was $184,000,  an increase from $157,000 at year end
1999, due to a job that was not shipped until the second quarter.

Net property,  plant and equipment was  $1,129,000 at March 31, 2000, a decrease
from  $1,170,000  at year end 1999.  For the first three months ending March 31,
2000, there were no capital expenditures made.

Trade accounts  payable was $207,000 at March 31, 2000, a decrease from $461,000
at  December  31,  1999 due to a reduction  in  purchasing  as a result of lower
sales.

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.

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
<PAGE>
                                                                               9

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 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>
10


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  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.

<PAGE>
                                                                              11


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.


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 first
quarter of 2000.


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12

                                    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

May 14, 2000