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, 1999
          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                         53214-3151
      --------------------------------------               ----------
     (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 15, 1999 there 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
                                        ------------------   ------------------
                                          1999      1998       1999      1998
                                        --------  --------   --------  --------
                                             (Thousands, except per share)

Sales                                   $    894  $    943   $  3,030  $  3,695
Cost of sales                                682       670      2,230     2,624
                                        --------  --------   --------  --------

  Gross Margin                               212       273        800     1,071

Marketing and administrative expense         326       426      1,097     1,300
                                        --------  --------   --------  --------

  Loss from Operations                      (114)     (153)      (297)     (229)

Other income (expense)
  Interest income                              2         7          5        19
  Interest expense                           (10)      (10)       (25)      (28)
  Other                                        0       836          1       858
                                        --------  --------   --------  --------

  Net Income/(Loss)                     $   (122) $    680   $   (316) $    620
                                        ========  ========   ========  ========

  Net Income/(Loss) per Common Share    $    .08) $    .68   $   (.20) $    .62
                                        ========  ========   ========  ========


                        STATEMENT OF ACCUMULATED DEFICIT

              Nine Months Ended September 30                   1999      1998
              ------------------------------                 --------  --------
                                                                 (thousands)

Accumulated deficit - beginning of year                      $(75,673) $(76,291)
Net income/(loss)                                                (316)      620
                                                             --------  --------
Accumulated deficit - September 30                           $(75,989) $(75,671)
                                                             ========  ========

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,
                                                         1999           1998
                                                     -------------  ------------
                                                             (thousands)
Assets
------

Cash and short-term investments                      $        58    $       223
Trade receivables, net                                       662            796
Inventories, net                                             129            127
Other current assets                                          63            112
                                                     -----------    -----------
       Total Current Assets                                  912          1,258

Net property, plant and equipment                          1,220          1,308
                                                     -----------    -----------
    Total Assets                                     $     2,132    $     2,566
                                                     ===========    ===========

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

Current maturities of long-term debt                 $        56    $        60
Trade accounts payable                                       240            291
Accrued employee benefits                                    140            155
Accrued pension liability                                 67,901         67,901
Other current liabilities                                    314            312
                                                     -----------    -----------
    Total Current Liabilities                             68,651         68,719

Accrued postretirement benefit obligations                   952            981
Long-term debt                                               211            232

Shareholders' deficit
  Common  stock,  ($.15 par  value,  authorized
  2,000,000  shares,  outstanding 1,588,128
  at September 30, 1999 and 1,000,028 at
  December 31, 1998)                                         152            152
  Capital in excess of par value                           8,155          8,155
  Accumulated deficit (accumulated deficit of
   $424,208 eliminated on December 2, 1988)              (75,989)       (75,673)
                                                     -----------    -----------
    Total Shareholders' Deficit                          (67,682)       (67,366)

Commitments and contingent liabilities               -----------    -----------

    Total Liabilities and Shareholders'
    Deficit                                          $     2,132    $     2,566
                                                     ===========    ===========


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
-----------------------

                                                             Nine Months Ended
                                                               September 30
                                                            -------------------
                                                              1999      1998
                                                            --------  --------
                                                                (thousands)
Cash flows from operating activities:
  Net income/(loss)                                         $   (316) $    620
  Adjustments to reconcile net income/loss to net cash
    (used) provided by operating activities:
      Depreciation and amortization                              125       138
      Gain on sale of fixed assets                                 0        (2)
      Change in working capital:
        Decrease in receivables, net                             134       206
        Decrease (increase) in inventories                        (2)       31
        Decrease in trade accounts payable                       (51)      (56)
        Decrease in other current items                           36        16
        Decrease in accrued pension liability, net                 0      (900)
      Other                                                      (29)      (40)
                                                            --------  --------

        Net cash (used) provided by operating activities        (103)       13

Cash flows from investing activities:
  Capital expenditures                                           (52)     (313)
  Proceeds from sale of equipment                                 15         0
                                                            --------  --------

        Net cash used by investing activities                    (37)     (313)

Cash flows from financing activities:
  Net proceeds from issuance of long-term debt                    29        71
  Payment of long-term debt                                      (54)      (44)
                                                            --------  --------

        Net cash (used) provided by financing activities         (25)       27
                                                            --------  --------

Net decrease in cash and short-term
 investments                                                    (165)     (273)

Cash and short-term investments at
 beginning of period                                             223       699
                                                            --------  --------

Cash and short-term investments at
 end of period                                              $     58  $    426
                                                            ========  ========

Supplemental information - interest paid                    $     25  $     28
                                                            ========  ========


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, 1998.

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
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) totaled approximately $67.9
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  accordance  with the  terms of the PBGC  Agreement,  the  Company  is
required to (i)  decrease the size of the Board of Directors of the Company (the
Board) to seven members;  (ii) cause a sufficient number of current directors of
the Company to resign from the Board and all committess thereof; and (iii) cause
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).

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).

<PAGE>

                                                                               7

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
contemplated 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.
<PAGE>

8

Sales in the third  quarter  of 1999  totaled  $894,000  a  decrease  of 5% from
$943,000 in the third  quarter of 1998.  The decrease was due to continued  soft
conditions  as a backlash  to the very low oil prices  during the second half of
1998 which  resulted in lower  shipments in 1999  compared to the same period in
1998. 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.

Gross margin,  as a percentage of sales, was 24% in the third quarter of 1999, a
decrease from 29% in 1998 due to competitive pricing.

Marketing and  administrative  expense was $326,000 in the third quarter of 1999
compared  with  $426,000  in the prior  year.  The  decrease  reflects  the 1998
nonreoccurring costs that were associated with the Consolidated Plan and related
IRS issues.  See Note 2 to the Financial  Statements for further  discussion.  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 $122,000,  or $.08 per common share,  in the
third  quarter of 1999  compared  with a profit of $680,000,  or $.68 per common
share,  in the same period of 1998.  The 1998 profit  included  $825,000  from a
$900,000 tax liability associated with the underfunding in the Consolidated Plan
that was settled for $75,000.

In the first nine months of 1999, the Company incurred a net loss of $316,000 or
$.20 per common  share  compared  with a profit of  $620,000  or $.62 per common
share in the same period of 1998.

Financial Condition and Liquidity

Cash and short  term  investments  totaled  $58,000 at  September  30,  1999,  a
decrease from $223,000 at December 31, 1998.

Net trade receivables at September 30, 1999 were $662,000, reflecting a decrease
from the  December 31, 1998 level of  $796,000.  This  decrease was due to lower
sales in the first nine months of 1999.

Inventory at September 30, 1999 was $129,000, a slight increase from $127,000 at
year end 1998.

Net  property,  plant and  equipment  was  $1,220,000  at September  30, 1999, a
decrease from $1,308,000 at year end 1998. For the nine months ending  September
30,   1999,   $52,000  of  capital   expenditures   were  made  to  insure  cost
competitiveness and the ability to reach new markets.

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

<PAGE>

                                                                               9

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
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 PBGC  Liability  totaled  approximately  $67.9
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 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 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 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  accordance  with the  terms of the PBGC  Agreement,  the  Company  is
required to (i)  decrease the size of the Board to seven  members;  (ii) cause a
sufficient  number of current  directors of the Company to resign from the Board
and all

<PAGE>

10

committees  thereof;  and (iii)  cause  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 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,  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  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).

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:  the  Registration  Rights  Agreement and 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  contemplated
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,  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.

<PAGE>

                                                                              11

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 PBGC  Directors 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  foregoing are summaries of certain  provisions of the PBGC  Agreement,  the
Registration  Rights Agreement and the Lock-Up Agreement.  The summaries are not
complete  descriptions  of the terms and conditions of those  agreements and are
qualified in their entirety by reference to the full text of the PBGC Agreement,
the  Registration  Rights  Agreement  and  the  Lock-Up  Agreement,   which  are
incorporated  herein by  reference  and copies of which have been filed with the
Securities and Exchange  Commission as exhibits to the Quarterly  Report on Form
10-Q for the quarter ended June 30, 1998.

The  Environmental  Protection  Agency  (EPA) and  certain  state  environmental
protection  agencies  have  requested  information  in  connection  with  eleven
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. The EPA's claims with respect to one other site
were  withdrawn  in 1994  based  upon  settlements  reached  with the EPA in the
bankruptcy  proceeding.  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 one of these  instances a former site  operator has
joined  Allis-Chalmers  and  47  other  potentially  responsible  parties  as  a
third-party  defendant in a lawsuit  involving  cleanup of one of the 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.  In one particular  site, the EPA's Region III has
concurred with the Company's position that claims for environmental cleanup were
discharged pursuant to the bankruptcy.  While each site is unique with different
circumstances,  the Company has notified  other  Regional  offices of the EPA of
this  determination  associated  with the Region III site.  The  Company has not
received responses from the other Regional offices. No environmental claims have
been asserted against the Company involving its postbankruptcy operations.

The only function that is year 2000 sensitive is our accounting  system. We have
received written  assurances from our software  provider that the system is year
2000 compliant.

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.
<PAGE>

12

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:  The  exhibits  filed  herewith  are as specified in the attached
     Exhibit Index.

(b)  Reports  on Form 8-K - No  report on Form 8-K was  filed  during  the third
     quarter of 1999.


                                    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.
                                         Vice Chairman, Executive Vice
                                         President and Chief Financial
                                         Officer

November 3, 1999

<PAGE>

                                                                              13

                           ALLIS-CHALMERS CORPORATION

                                  Exhibit Index
                                  -------------

Exhibit No.    Description
-----------    -----------

(3.1)          March  31,  1999  Amendment  to  the  By-Laws  of  Allis-Chalmers
               Corporation

(3.2)          Amended and Restated  By-Laws of  Allis-Chalmers  Corporation (as
               amended through March 31, 1999)

(27)           Financial Data Schedule