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 JUNE 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                                53045
    (Address of principal executive offices)                (Zip code)


                                  (414)781-7155
               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 July 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


<TABLE>
<CAPTION>


                                              Three Months Ended              Six Months Ended
                                                    June 30                       June 30
                                             ----------------------        ---------------------
                                               1999          1998            1999         1998
                                             --------       -------        -------       -------
                                                         (thousands, except per share)

<S>                                          <C>            <C>            <C>           <C>
Sales                                        $  1,084       $ 1,249        $ 2,136       $ 2,752
Cost of sales                                     835           937          1,548         1,954
                                             --------       -------        -------       -------

    Gross Margin                                  249           312            588           798


Marketing and administrative expense              381           515            771           874
                                             --------       -------        -------       -------

    Income/(Loss) from Operations                (132)         (203)          (183)          (76)

Other income (expense)
   Interest income                                  2             6              3            12
   Interest expense                                (7)           (9)           (15)          (18)
  Other                                             0             9              1            22
                                             --------       -------        -------       -------

    Net Income/(Loss)                        $   (137)      $  (197)       $  (194)      $   (60)
                                             ========       =======        =======       =======

    Net Income/(Loss) per Common Share       $    (.9)      $  (.20)       $  (.15)      $  (.06)
                                             ========       =======        =======       =======
</TABLE>


<TABLE>
<CAPTION>

                        STATEMENT OF ACCUMULATED DEFICIT

                             Six Months Ended June 30              1999         1998
                             ------------------------            --------     --------
                                                                       (thousands)

<S>                                                              <C>          <C>
Accumulated deficit - beginning of year                          $(75,673)    $(76,291)
Net income/(loss)                                                    (194)         (60)
                                                                 --------     --------
Accumulated deficit - June 30                                    $(75,867)    $ (76,351)
                                                                 ========     =========

This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.
</TABLE>


<PAGE>


                                                                               3

ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF FINANCIAL CONDITION

<TABLE>
<CAPTION>

                                                                       June 30,       December 31,
                                                                         1999            1998
                                                                       ---------      ------------
                                                                             (thousands)
Assets

<S>                                                                    <C>             <C>
Cash and short-term investments                                        $    186        $     223
Trade receivables, net                                                      592              796
Inventories, net                                                             67              127
Other current assets                                                         56              112
                                                                       ---------       ---------

       Total Current Assets                                                 901            1,258

Net property, plant and equipment                                         1,270            1,308
                                                                       ---------       ---------

       Total Assets                                                    $  2,171        $   2,566
                                                                       =========       =========

Liabilities and Shareholders' Deficit

Current maturities of long-term debt                                   $     75        $      60
Trade accounts payable                                                      179              291
Accrued employee benefits                                                   135              155
Accrued pension liability                                                67,901           67,901
Other current liabilities                                                   278              312
                                                                       ---------       ---------

       Total Current Liabilities                                         68,568           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 June 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)                             (75,867)         (75,673)
                                                                       ---------       ---------


       Total Shareholders' Deficit                                      (67,560)         (67,366)

Commitments and contingent liabilities
                                                                       ---------       ---------
       Total Liabilities and Shareholders'
        Deficit                                                        $  2,171        $   2,566
                                                                       ========        =========


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.
</TABLE>


<PAGE>


4


ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                         Six Months Ended
                                                                             June 30
                                                                     -----------------------
                                                                      1999            1998
                                                                     -------         -------
                                                                           (thousands)
<S>                                                                  <C>             <C>
Cash flows from operating activities:
  Net loss                                                           $  (194)        $   (60)
  Adjustments to reconcile net loss to net cash
    provided (used) by operating activities:
      Depreciation and amortization                                       83              88
      Change in working capital:
        Decrease in receivables, net                                     204              23
        Decrease in inventories                                           60              23
        Decrease in trade accounts payable                              (112)            (76)
        Increase in other current items                                    2             185
       Other                                                             (29)            (26)
                                                                     -------         -------

        Net cash provided by operating activities                         14             157

Cash flows from investing activities:
  Capital expenditures                                                   (47)           (221)
  Proceeds from sale of equipment                                          2               2
                                                                     -------         -------

        Net cash (used) by investing activities                          (45)           (219)

Cash flows from financing activities:
  Net proceeds from issuance of long-term debt                            29              71
  Payment of long-term debt                                              (35)            (30)
                                                                     -------         -------

        Net cash provided (used) by financing activities                  (6)             41
                                                                     -------         -------

Net decrease in cash and short-term investments                          (37)            (21)

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

Cash and short-term investments at
 end of period                                                       $   186         $   678
                                                                     =======         =======

Supplemental information - interest paid                             $    15         $    18
                                                                     =======         =======


This interim statement is unaudited.

The accompanying Notes are an integral part of the Financial Statements.
</TABLE>


<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.


<PAGE>

6



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  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

<PAGE>

                                                                               7



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  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.

<PAGE>

8


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 second  quarter of 1999  totaled  $1,084,000 a decrease of 13% from
$1,249,000 in the second quarter of 1998. The decrease was due to extremely 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 23% in the second quarter of 1999, a
decrease from 25% in 1998 due to competitive pricing.

Marketing and administrative  expense was $381,000 in the second quarter of 1999
compared  with  $515,000  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 $137,000,  or $.09 per common share,  in the
second quarter of 1999 compared with a net loss of $197,000,  or $.20 per common
share, in the same period of 1998.

In the first half of 1999,  the Company  incurred a net loss of $194,000 or $.15
per common share compared with a loss of $60,000 or $.06 per common share in the
same period of 1998.

Financial Condition and Liquidity

Cash and short term  investments  totaled  $186,000 at June 30, 1999, a decrease
from $223,000 at December 31, 1998.

Net trade receivables at June 30, 1999 were $592,000, reflecting a decrease from
the December 31, 1998 level of $796,000. This decrease was due to lower sales in
the first half of 1999.

Inventory at June 30, 1999 was  $67,000,  a decrease  from  $127,000 at year end
1998.  This  reduction  was  primarily due to one order for $110,000 that was in
work in  process  at year end 1998 and was  subsequently  shipped  in the second
quarter of 1999.
<PAGE>

                                                                               9


Net property,  plant and  equipment was  $1,270,000 at June 30, 1999, a decrease
from  $1,308,000  at year end 1998.  For the six months  ending  June 30,  1999,
$47,000 of capital expenditures were made to insure cost competitiveness and the
ability to reach new markets.

Other  current  liabilities  at June 30,  1999 were  $278,000,  a decrease  from
$312,000 at December 31, 1998.

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
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.

<PAGE>

10


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 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

<PAGE>

                                                                              11


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.

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 this Quarterly Report on Form
10-Q.

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

<PAGE>

12


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 Company's  principal sources of cash include earnings from the operations of
HDS and interest income on marketable  securities.  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: The exhibits listed in the accompanying exhibit index are filed as
a part of this Form 10-Q.

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






<PAGE>


                                                                              13

                                    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

August 3, 1999




<PAGE>


                                       14

                           ALLIS-CHALMERS CORPORATION

                                  Exhibit Index



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

(10.1)            Agreement   dated  as  of  March  31,  1999,  by  and  between
                  Allis-Chalmers  Corporation and the Pension  Benefit  Guaranty
                  Corporation

(10.2)            Lock-Up  Agreement  dated as of March 31,  1999,  by and among
                  Allis-Chalmers  Corporation,   the  Pension  Benefit  Guaranty
                  Corporation,  acting in its individual capacity and as trustee
                  of  the  Allis-Chalmers   Consolidated   Pension  Plan,  AL-CH
                  Company, L.P., Wells Fargo Bank, as trustee under that certain
                  Amended and Restated  Retiree  Health Trust  Agreement for UAW
                  Retired  Employees of  Allis-Chalmers  Corporation 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.

(10.3)            Registration  Rights  Agreement dated as of March 31, 1999, by
                  and between Allis-Chalmers Corporation and the Pension Benefit
                  Guaranty Corporation

(27)              Financial Data Schedule