FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

            (Mark One)

           [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

           For the fiscal year ended December 31, 1997

                                      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.)

           Box 512, Milwaukee, Wisconsin                  53201-0512
       (Address of principal executive offices)          (Zip code)

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


        Securities registered pursuant to Section 12(b) of the Act:  None


           Securities registered pursuant to Section 12(g) of the Act:

                               Title of each class

                          Common Stock - $.15 Par Value

           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 if disclosure of delinquent filers pursuant
   to Item 405 of Regulation S-K is not contained herein, and will not be
   contained, to the best of registrant's knowledge, in definitive proxy or
   information statements incorporated by reference in Part III of this Form
   10-K or any amendment to this Form 10-K.     X

           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 March 3, 1998, there were 1,003,028 shares of Common Stock
   outstanding.

   <PAGE>

                             1997 FORM 10-K CONTENTS

   PART I

                     Item                                   Page

             1.  Business.                                    3
             2.  Properties.                                  5
             3.  Legal Proceedings.                           5
             4.  Submission of Matters to a Vote of
                   Security Holders.                          7

   PART II
             5.  Market for Registrant's Common Equity
                   and Related Stockholder Matters.           8
             6.  Selected Financial Data.                     9
             7.  Management's Discussion and Analysis
                   of Financial Condition and Results
                   of Operations.                            10
             7A. Quantitative and Qualitative
                   Disclosures about Market Risk.            14
             8.  Financial Statements and Supplementary
                   Data.                                     15
             9.  Changes in and Disagreements with
                   Accountants on Accounting and
                   Financial Disclosure.                     30

   PART III
           10.   Directors and Executive Officers
                   of the Registrant.                        31
           11.   Executive Compensation.                     34
           12.  Security Ownership of Certain
                   Beneficial Owners and Management.         35
           13.   Certain Relationships and Related
                   Transactions.                             37

   PART IV
           14.   Exhibits, Financial Statement Schedules
                   and Reports on Form 8-K.                  38

           Signatures.                                       41

   <PAGE>

                                     PART I


   ITEM 1.  BUSINESS.

   (a)  Development of the Business

   GENERAL

   Allis-Chalmers Corporation (Allis-Chalmers or the Company) was
   incorporated in 1913 under Delaware law.  The Company sold its major
   operating businesses in 1988 in accordance with its First Amended and
   Restated Joint Plan of Reorganization (Plan of Reorganization) under
   Chapter 11 of the United States Bankruptcy Code.  The Plan of
   Reorganization was confirmed by the Bankruptcy Court on October 31, 1988
   after acceptance by creditors and shareholders and was consummated on
   December 2, 1988.  See Item 3. LEGAL PROCEEDINGS for a discussion of such
   proceedings.

   The Company has its principal executive office in West Allis, Wisconsin
   and it maintains three wholly-owned subsidiaries.  One subsidiary, Houston
   Dynamic Service, Inc., operates a machine repair business in Houston,
   Texas; the other two subsidiaries, KILnGAS R&D, Inc. and U.S. Fluidcarbon
   Inc., are inactive.

   On September 22, 1994, the Company sold its B.R.B. Industries division.
   B.R.B. Industries, which was acquired by the Company on December 20, 1989
   in a purchase of assets, is a Hoboken, New Jersey manufacturer of molded
   fabric products serving the apparel and lingerie markets and the home
   sewing and notions industries.

   (b)  Financial Information About Industry Segments

   The Company operates in a single industry segment -- the repair and
   service of mechanical rotating equipment for the industrial, utility and
   governmental aftermarkets.

   (c)  Narrative Description of Business

   The principal business activities of the Company are as follows:

   MACHINE REPAIR

   Sales of the machine repair business operated by Houston Dynamic Service,
   Inc. (HDS), a wholly-owned subsidiary of the Company, were $4,062,000 in
   1997,  $4,060,000 in 1996 and $3,190,000 in 1995.  The increase in 1996
   and 1997 sales from 1995 was primarily the result of strong market
   conditions coupled with a more focused marketing strategy and product
   offering.

   HDS services and repairs various types of mechanical equipment, including
   compressors (centrifugal, rotary, axial and reciprocating), pumps,
   turbines, engines, heat exchangers, centrifuges, rollers, gears, valves,
   blowers, kilns, crushers and mills.  Services provided include emergency
   repair, disassembly, inspection, repair testing, parts duplication,
   machining, balancing, metalizing, milling, grinding, boring, welding,
   modification, reassembly, field machining, maintenance, alignment, field
   service, installation, startup and training.

   HDS employed 36 people on December 31, 1997.  It operates out of a
   facility in Houston, Texas which was purchased by HDS in 1990.  The
   facility includes repair shop and office space.

   HDS serves various industrial customers, including those in the
   petrochemical, chemical, refinery, utility, waste and waste treatment,
   minerals processing, power generation, pulp and paper and irrigation
   industries.

   OTHER DATA

   Competition in the Company's machine repair business consists of nine
   major original equipment manufacturers (OEM) and numerous smaller
   independent competitors.  Many of these competitors have special strengths
   in certain product areas because of customer preferences for OEM suppliers
   or because specialized patented technologies are offered.  The principal
   methods of competition are price, quality, delivery, customer service and
   warranty.

   The principal raw materials and purchased components used in the machine
   repair business are alloy and stainless steels, castings and forgings,
   aluminum, copper, gears and other basic materials.  Alternative sources of
   supply exist or could be developed for all of these raw materials and
   components.  This business is highly labor intensive.

   Some of the Company's products, processes and systems are covered by
   patents owned by or licensed to the Company.  No particular product,
   process or system is dependent on a single fundamental patent, the loss of
   which would jeopardize the Company's businesses.  The Company licenses the
   use of a number of its trademarks, from which it receives income.

   During the past three years, Amoco Chemical was the only customer which
   accounted for 10% or more of total Company sales -- Amoco Chemical
   generated 12% of 1997 sales, 16% of 1996 sales and 26% of 1995 sales.

   Expenditures relating to compliance with federal, state and local
   environmental protection laws are not expected to have a material effect
   on the Company's capital expenditures, results of operations, financial
   condition or competitive position.  The Company is not aware of any
   present statutory requirements concerning environmental quality that would
   necessitate capital outlays which would materially affect the Company.  In
   conjunction with consummation of the Plan of Reorganization, the Company
   settled all known environmental claims asserted by the United States
   Environmental Protection Agency (EPA) as well as claims asserted by
   certain state agencies.  However, the EPA and third parties have claimed
   that Allis-Chalmers is liable for cleanup costs associated with certain
   hazardous waste disposal sites in which products manufactured and sold by
   Allis-Chalmers before consummation of the Plan of Reorganization were
   ultimately disposed of by others.  Since Allis-Chalmers manufactured and
   sold the products disposed of in these sites before consummation of the
   Plan of Reorganization, Allis-Chalmers has taken the position that all
   cleanup costs or other liabilities related to these sites were discharged
   in the bankruptcy.  See Item 3. LEGAL PROCEEDINGS.

   The Company's employment was 42, 44 and 34 at December 31, 1997, 1996 and
   1995, respectively.

   For more detailed information, the audited 1997 Consolidated Financial
   Statements, Notes to Consolidated Financial Statements and Management's
   Discussion and Analysis of Financial Condition and Results of Operations
   contained in this report should be read in their entirety.

   (d)     Financial Information About Foreign and
           Domestic Operations and Export Sales

   The Company has no foreign operations or significant export sales.


   ITEM 2. PROPERTIES.

   The Company's principal operating facility is a repair shop and office
   building in Houston, Texas, which is owned by HDS.  Allis-Chalmers leases
   its administrative offices in West Allis, Wisconsin on a short-term basis.
   The facilities are considered adequate and suitable for the Company's
   principal business.


   ITEM 3.  LEGAL PROCEEDINGS.

   REORGANIZATION PROCEEDINGS UNDER CHAPTER 11
   OF THE UNITED STATES BANKRUPTCY CODE

   On June 29, 1987 Allis-Chalmers and 17 of its domestic subsidiaries filed
   separate voluntary petitions for reorganization under Chapter 11 of the
   United States Bankruptcy Code.  The Plan of Reorganization was confirmed
   by the Bankruptcy Court on October 31, 1988 after acceptance by creditors
   and shareholders, and the Plan of Reorganization was consummated on
   December 2, 1988.

   At confirmation, the Bankruptcy Court approved the establishment of the A-
   C Reorganization Trust as the primary vehicle for distributions under the
   Plan of Reorganization, two trust funds to service health care and life
   insurance programs for retired employees and a trust fund to process and
   liquidate future product liability claims.  Cash of approximately $400
   million and other assets with a net book value of $38 million were
   distributed to creditors or transferred to the trusts, and the trusts
   assumed responsibility for substantially all remaining cash distributions
   to be made to holders of claims and interests pursuant to the Plan of
   Reorganization.  The Company was thereby discharged of all debts that
   arose before confirmation of the Plan of Reorganization, and all of its
   capital stock was canceled and made eligible for exchange for shares of
   the reorganized Company.

   The Company does not administer any of the aforementioned trusts and
   retains no responsibility for the assets transferred to or distributions
   to be made by such trusts pursuant to the Plan of Reorganization.

   For a description of restrictions on the transfer of the common stock of
   the reorganized Company, see Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
   AND RELATED STOCKHOLDER MATTERS.


   ENVIRONMENTAL PROCEEDINGS

   As part of the Plan of Reorganization the Company made a cash payment of
   $4.5 million to the EPA in settlement of the EPA's claims for cleanup
   costs at all sites where the Company was alleged to have disposed of
   hazardous waste.  The EPA settlement included both past and future cleanup
   costs at these sites and released the Company of liability for claims of
   contribution or indemnity which may be asserted by other potentially
   responsible parties against Allis-Chalmers in connection with these
   specific sites.

   In addition to the EPA settlement, the Company negotiated settlements of
   various environmental claims which had been asserted by certain state
   environmental protection agencies.  These settlements, totaling
   approximately $200,000, were approved by the Bankruptcy Court.

   Since consummation of the Plan of Reorganization on December 2, 1988, a
   number of parties, including the EPA, have asserted that the Company is
   responsible for the cleanup of hazardous waste sites.  These assertions
   have been made only with respect to the Company's prebankruptcy
   activities.  No claims have been asserted against the Company involving
   its postbankruptcy operations.

   Before the settlement with the EPA in the bankruptcy proceedings, an
   attempt was made by the parties to identify all possible hazardous waste
   disposal sites and to settle all liabilities relating to those sites.
   Notwithstanding the breadth of the settlement, various EPA regional
   offices have continued to assert cleanup claims against Allis-Chalmers
   with respect to several sites.  Apparently, not all offices of the EPA are
   aware of the settlement agreement, since at least two of these claims
   involve sites with respect to which the EPA specifically agreed not to
   sue.

   Certain other parties have asserted that the Company is responsible for
   environmental cleanup costs or associated EPA fines in connection with
   additional sites.  In each instance the Company activities complained of
   occurred prior to the Company's bankruptcy proceedings and the third
   parties did not file proofs of claim in the bankruptcy proceedings.  The
   filing of such proofs of claim is required by the Bankruptcy Code to
   effect a claim against a Chapter 11 debtor.  A bankruptcy discharge
   defense has been asserted by the Company in each instance.

   Although the law in this area is still somewhat unsettled, three Federal
   Courts of Appeal have held that a debtor can be discharged of
   environmental cleanup liabilities related to its prebankruptcy activities.
   The Company believes it will prevail in its position that its liability to
   the EPA and third parties for prebankruptcy environmental cleanup costs
   has been fully discharged.  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.

   The EPA and certain state agencies also continue to request information in
   connection with various waste disposal sites in which products
   manufactured by Allis-Chalmers before consummation of the Plan of
   Reorganization were ultimately disposed of by other parties.  Although the
   Company has been discharged of liabilities with respect to hazardous waste
   sites, it is under a continuing obligation to provide information with
   respect to its products to federal and state agencies.  The A-C
   Reorganization Trust, under its mandate to provide Plan of Reorganization
   implementation services to the Company, has responded to these
   informational requests because prebankruptcy activities are involved.


   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

   Not applicable.

                                     PART II

   ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS.

   The Company's Plan of Reorganization provided for cancelling the old
   common stock of Allis-Chalmers on December 2, 1988 and issuing new common
   stock of the reorganized Company (Common Stock) to certain holders of
   claims and interests, including holders of old common stock.

   After receiving approval of a majority of shareholders of Common Stock,
   the Company amended its Amended and Restated Certificate of Incorporation
   (Amendment), effective as of July 8, 1992, to effect a 1-for-15 reverse
   stock split of the Common Stock pursuant to which each 15 shares of Common
   Stock, $.01 par value per share, were combined into one share of new
   Common Stock, $.15 par value per share.  In lieu of the issuance of
   fractional shares of Common Stock, the Amendment provided that
   shareholders owning less than 15 shares of Common Stock were entitled to
   receive a cash payment at the rate of $8.85 per share of Common Stock
   (equivalent to $0.59 per share of the presplit Common Stock).  This
   action, decreased the number of outstanding shares of Common Stock to
   1,003,596 from 15,164,195 shares immediately prior to the reverse stock
   split and decreased the number of shareholders to 7,408 from 17,799 prior
   to the reverse stock split.  Per share amounts in the accompanying
   financial statements reflect the reverse stock split.

   Pursuant to the Stock Sales Escrow Agreement which was established in
   conjunction with the Plan of Reorganization, the Company's stock transfer
   agent, Continental Stock Transfer & Trust Company, completed the first
   release of shares of Common Stock from escrow in July 1992.  Stock
   certificates, representing approximately 40% of the outstanding shares of
   Common Stock held in escrow, were distributed to shareholders of record as
   of the close of business on July 8, 1992.  The balance of the outstanding
   shares of Common Stock were released from escrow on August 1, 1995.

   The Common Stock is subject to trading restrictions that are set forth in
   its Amended and Restated Certificate of Incorporation.  The trading
   restrictions are designed to maximize the likelihood of preserving the
   Company's substantial net operating loss carryforwards.  There is no
   established public trading market for the Common Stock.  It is not certain
   when or if trading in the Common Stock will commence or on which
   registered stock exchange or quotation system, if any, the Common Stock
   may eventually be listed or quoted.  At the present time, the Company does
   not intend to file a listing application to any registered national stock
   exchange or Nasdaq for trading or quotation of the Common Stock.

   No dividends were declared or paid during 1997, 1996 or 1995.

   <TABLE>

   <CAPTION>

   ITEM 6.  SELECTED FINANCIAL DATA. 1.

                                            1997          1996         1995         1994         1993
                                                  (millions, except per share data)
   <S>                                     <C>            <C>       <C>          <C>          <C>
   Statement of Income Data:
     Sales                                  $4.1          $ 4.1     $   3.2      $   3.6      $   3.3

     Income (loss) from:
       Continuing Operations               (66.5)          (1.7)       (1.4)        (1.1)        (1.3)
       Discontinued Operations                 -              -        -            (0.2)         0.2
       Sale of molded fabric
         products division                     -              -        -            (2.9)           -
       Cumulative effect of
        accounting change                      -              -           -            -         (1.0)
                                      ----------      ---------    --------    ---------    ---------
         Net loss                          (66.5)          (1.7)       (1.4)        (4.2)        (2.1)

     Income (loss) per share (Basic
      and Diluted) from:
       Continuing Operations              (66.34)         (1.72)      (1.44)       (1.08)       (1.31)
       Discontinued Operations                 -              -           -         (.23)         .24
       Sale of molded fabric
         products division                     -              -           -        (2.82)           -
       Cumulative effect of
        accounting change                      -              -           -            -        (1.02)
                                       ---------      ---------    --------     --------     --------
         Net loss                         (66.34)         (1.72)      (1.44)       (4.13)       (2.09)

   Statement of Financial
    Condition Data:

     Total assets                            2.7            3.4         4.1          4.6         11.5

     Long-term debt classified as:
       Current                               0.1            0.1         0.3            -          0.2
       Long-term                             0.2            0.3           -          0.3          3.1

     Shareholders' deficit                 (68.0)         (13.6)       (9.9)        (6.9)        (3.2)


   1.  Reflects the results of operations of the Company's BRB division as a discontinued operation.

   </TABLE>

   <PAGE>

   ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS.

   This discussion should be read in conjunction with the Report to Our
   Shareholders and the Consolidated Financial Statements including the Notes
   to Consolidated Financial Statements.

   Overview

   Allis-Chalmers, after emerging from Chapter 11 under the Company's Plan of
   Reorganization which was consummated on December 2, 1988, entered into an
   agreement with AL-CH Company, L.P. (Investor) pursuant to which the
   Investor agreed to purchase 6.1 million shares of Common Stock (40% of the
   outstanding Common Stock) for $3,750,000 in cash.  The Investor is a
   limited partnership controlled by Messrs. Robert E. Nederlander and
   Leonard Toboroff.

   The acquisition environment has been unfavorable since the Investor's cash
   contribution to the Company and remained very difficult for the Company
   during 1997.  The problems continued to include the Company's lack of cash
   for investment, limited availability of debt financing for acquisitions
   and the financial exposure associated with the Allis-Chalmers Consolidated
   Pension Plan (Consolidated Plan).  Allis-Chalmers moved forward in 1997 to
   resolve a major impediment to its future.  On September 30, 1997, the
   Pension Benefit Guaranty Corporation (PBGC) announced it had assumed the
   assets and liabilities of the Consolidated Plan.  In addition, the Company
   has reached an agreement in principle with the PBGC on the settlement of
   its liabilities to the PBGC arising from the termination of the
   Consolidated Plan, subject to reaching an acceptable settlement with the
   Internal Revenue Service (IRS) regarding certain excise taxes assessed on
   unpaid delinquent Consolidated Plan underfunding installments.  Therefore,
   the Company continues to proceed cautiously with its efforts to identify
   and evaluate potential candidates for acquisition.

   The Company continues its efforts to conserve cash resources.  However,
   the expenses associated with the ongoing Securities and Exchange
   Commission and other governmental reporting as well as legal, accounting
   and audit, tax, insurance and costs associated with other corporate
   requirements of a publicly held company will continue to make it difficult
   for the Company, at its present size, to achieve a positive cash flow.

   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 cash
   contribution 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 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) total 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 (the PBGC
   Agreement).  The PBGC Agreement calls for the PBGC to release Allis-
   Chalmers and its subsidiaries from the PBGC Liability in return for that
   number of shares of Allis-Chalmers' common stock that represents 35% of
   the total number of shares issued and outstanding on a fully-diluted
   basis.

   The PBGC Agreement is subject to negotiation of definitive documentation
   and to satisfactory resolution of Allis-Chalmers 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 percent 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 percent 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 Allis-Chalmers 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
   have resulted, or will result, in first-tier taxes under Code section
   4971(a) of approximately $900,000.

   On March 2, 1998, Allis-Chalmers sent the IRS a formal Offer in Compromise
   of the Company's tax liability under Code section 4971.  If accepted by
   the IRS, the Offer in Compromise will (i) require Allis-Chalmers to pay
   the IRS $25,000, plus interest from March 2, 1998 and (ii) extinguish the
   Company's tax liability under Code section 4971, subject to the standard
   conditions attendant to an Offer in Compromise.

   Although the IRS has not yet responded to the Offer in Compromise, Allis-
   Chalmers' management is hopeful that a mutually acceptable settlement can
   be achieved.  If a satisfactory settlement cannot be reached with IRS, or
   if definitive documentation of the PBGC Agreement is not achieved for any
   other reason, Allis-Chalmers will evaluate other alternatives, including a
   bankruptcy filing.

   Results of Operations

   Results of operations for 1997, 1996  and 1995 reflect the sole operation
   of the business of Allis-Chalmers:  the machine repair business, HDS.

   Sales totaled $4.1 million in 1997, compared with $4.1 million and $3.2
   million in 1996 and 1995, respectively.  The increase in sales for 1996
   and 1997 from 1995 is primarily the result of strong market conditions
   coupled with a more focused marketing strategy and product offering.

   Gross margins, as a percentage of sales, were 25.0%, 26.1% and 25.7% in
   1997, 1996 and 1995, respectively.  Market activity was inconsistent
   during most of 1997 where a higher number of orders were booked, but the
   average dollar order was significantly lower than in 1996 due to
   competitive pressures and product mix changes.  This resulted in lower
   gross margins than experienced in 1996.

   Marketing and administrative expense was $1.7 million, $1.4 million and
   $1.3 million in 1997, 1996 and 1995, respectively.  Marketing and
   administrative expense was 41.9% of sales in 1997 compared with 34.8% in
   1996 and 41.1% in 1995.  The increase in 1997 was primarily the result of
   additional legal fees incurred in connection with the termination of the
   Consolidated Plan and related negotiations with the PBGC and IRS along
   with increased marketing expenses at HDS.  Marketing and administrative
   expense had been significantly reduced since 1994 as a result of cost
   reduction activity at HDS and at the Company's corporate offices.  A
   significant portion of the Company's administrative expense relates to
   expenses for Securities and Exchange Commission and other governmental
   reporting as well as the legal, accounting and audit, tax, insurance and
   other requirements of a publicly held company.

   The Company had a loss from operations of $646,000 in 1997 compared with a
   1996 loss of $353,000 and a loss of $491,000 in 1995.  The change from
   1996 resulted primarily from the  aforementioned legal fees and HDS
   marketing expenses.

   Interest income in each of the years resulted mainly from earnings on
   short-term investments.  However, for the complete year of 1995, interest
   income also was derived from a note receivable from the sale of the B.R.B.
   Industries division ( a molded fabric business) in September 1994.
   Interest expense primarily relates to a term loan, the proceeds of which
   were used to purchase the shop and office building from which HDS
   operates.

   Pension expense which relates to the recognition of the pension liability
   associated with the Consolidated Plan in accordance with Statement of
   Financial Accounting Standards No. 87 "Employer's Accounting for
   Pensions," was $1,397,000, $1,422,000 and $1,067,000 in 1997, 1996 and
   1995, respectively.  The 1997 expense was for a nine month period as the
   transfer of the Consolidated Plan to the PBGC took place on September 30,
   1997.  The termination of the Consolidated Plan resulted in an additional
   $64.5 million pension expense in 1997, including $.9 million for IRS
   excise taxes.

   The Company incurred a net loss of $66,545,000 (including recognition of
   pension expense of $65,926,000), or $66.34 per common share, in 1997
   compared with a net loss of $1,728,000 (including recognition of pension
   expense of $1,422,000), or $1.72 per common share, in 1996.  Pension
   expense accounted for $65.73 per common share of the net loss in 1997.

   Liquidity and Capital Resources

   At December 31, 1997, the Company had cash and short-term investments
   totaling $699,000, a decrease from $1,568,000 at December 31, 1996.   This
   decrease was the result of expenses associated with the ongoing corporate
   reporting, as well as legal, accounting, pension, audit, tax and
   insurance.  In addition, HDS had expenditures of $304,000 for capital
   items.

   Trade receivables at December 31, 1997 were $683,000, compared with
   $652,000 at  December 31, 1996.  This increase was primarily the result of
   certain major projects completed and billed by HDS near the end of the
   year.

   Inventory at December 31, 1997 was $101,000, a slight increase from
   $93,000 at year end 1996.

   Net property, plant and equipment at December 31, 1997 was $1,107,000, an
   increase from $937,000 at December 31, 1996.  The Company spent $304,000
   on capital expenditures during fiscal 1997.  Approximately $185,000 was
   invested in machinery and equipment acquisitions while approximately
   $120,000 was spent to improve the operations facilities (including a much
   needed revamping of the Company's electric service to the shop area and a
   building enclosure to help increase operations capacity and
   effectiveness).  The expenditures for additional or upgrades of machinery
   and tooling were necessary to reduce production costs by decreasing
   downtime and increasing production efficiency output while positioning the
   Company for further growth through the increased capacity and service
   capabilities it offers to the marketplace.

   Current maturities of long-term debt at December 31, 1997 were $38,000
   compared with $54,000 at year-end 1996.  This decrease included payments
   on the real estate loan refinanced by HDS in August 1996.  The proceeds of
   the original loan were used in 1990 for the purchase of the land and
   building in which HDS operates its business in Houston, Texas.  The amount
   refinanced is required to be repaid in monthly installments of $3,278
   through August 20, 2001, when the remaining unpaid balance is due.  At
   December 31, 1997, the interest rate on the note was 10.5%.  This rate is
   subject to adjustments during the term of the note in accordance with
   increases or decreases in the prime rate.  The note is secured by the HDS
   facility having a net book value of $456,000 at December 31, 1997 and the
   Company's guaranty.

   The Company's principal sources of cash include earnings from operations
   and interest income on short-term investments.  The cash requirements
   needed for the administrative expenses associated with being a publicly
   held company are significant, and management believes that the Company
   will continue to use a substantial portion of its cash balances in 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.  Such costs include an allocated share of
   certain expenses for Company employees, professional fees and certain
   other administrative expenses.

   The 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.

   Financial Condition

   Shareholders' deficit at December 31, 1997 was $68.0 million.  A three-
   year comparison of shareholders' deficit follows:

                     (millions)              1997     1996    1995

   January 1                            $    (13.6) $ (9.9)  $(6.9)
   Net loss                                  (66.5)   (1.7)   (1.4)
   Pension liability adjustment               12.1    (2.0)   (1.6)
                                         ---------  ------  -------
   December 31                          $    (68.0) $(13.6)  $(9.9)
                                         =========  ======  =======


   ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
             RISK.

   Not applicable.


   ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                   Index to Consolidated Financial Statements


                                                                       Page
   Financial Statements:

       Report of Independent Accountants                                 16
       Statement of Operations for the Three Years
         Ended December 31, 1997                                         17
       Statement of Accumulated Deficit for the
         Three Years Ended
          December 31, 1997                                              17
       Statement of Financial Condition at
          December 31, 1997 and 1996                                     18
       Statement of Cash Flows for the Three Years
          Ended December 31, 1997                                        19
       Notes to Consolidated Financial Statements                        20

       Financial Statement Schedule

           II   Valuation and Qualifying Accounts                        40

   <PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS


   To the Board of Directors and
    Shareholders of Allis-Chalmers Corporation


   In our opinion, the consolidated financial statements listed in the
   accompanying index present fairly, in all material respects, the financial
   position of Allis-Chalmers Corporation and its subsidiaries at December
   31, 1997 and 1996, and the results of their operations and their cash
   flows for each of the three years in the period ended December 31, 1997,
   in conformity with generally accepted accounting principles.  These
   financial statements are the responsibility of the Company's management;
   our responsibility is to express an opinion on these financial statements
   based on our audits.  We conducted our audits of these statements in
   accordance with generally accepted auditing standards which require that
   we plan and perform the audit to obtain reasonable assurance about whether
   the financial statements are free of material misstatement.  An audit
   includes examining, on a test basis, evidence supporting the amounts and
   disclosures in the financial statements, assessing the accounting
   principles used and significant estimates made by management, and
   evaluating the overall financial statement presentation.  We believe that
   our audits provide a reasonable basis for the opinion expressed above.

   The accompanying financial statements have been prepared assuming that the
   Company will continue as a going concern.   The Company's application for
   a distress termination of the Allis-Chalmers Consolidated Pension Plan
   (the "Consolidated Plan") was approved by the Pension Benefit Guaranty
   Corporation ("PBGC") on September 30, 1997.  At such date, PBGC became the
   trustee of the Consolidated Plan and the Company and it subsidiaries
   incurred an estimated liability to PBGC for unfunded benefit liabilities
   and accumulated funding deficiencies totaling approximately $68 million.
   The Company does not have the financial resources to fund this liability
   to PBGC.  This matter raises substantial doubt about the Company's ability
   to continue as a going concern.  Management's plans in regard to this
   matter are described in Notes 9 and 10 to the financial statements.  The
   financial statements do not include any adjustments that might result from
   the outcome of this uncertainty.




   Price Waterhouse LLP
   Milwaukee, Wisconsin
   March 24, 1998

   <PAGE>

                             STATEMENT OF OPERATIONS



             Year Ended December 31       1997        1996            1995
                                        (thousands, except per share)

   Sale                                 $4,062       $4,060           $3,190
   Cost of sales                         3,048        3,000            2,371
                                        ------      -------           ------
     Gross Margin                        1,014        1,060              819

   Marketing and administrative
     expense                             1,660        1,413            1,310
                                        ------      -------           ------
     Loss from Operations                 (646)        (353)            (491)

   Other income (expense)
     Interest income                        54           70              136
     Interest expense                      (45)         (39)             (46)
     Pension expense                   (65,926)      (1,422)          (1,067)
     Other                                  18           16               20
                                     ---------     --------         --------
      Net Loss                         (66,545)$     (1,728)$         (1,448)
                                     =========     ========         ========
      Net Loss per Common Share
       (Basic and Diluted)              (66.34)       (1.72)$          (1.44)
                                     =========     ========         ========

                        STATEMENT OF ACCUMULATED DEFICIT


              Year Ended December 31    1997        1996     1995
                                                (thousands)

   Accumulated deficit beginning
     of year                      $     (9,746) $ (8,018)   $(6,570)
   Net loss                            (66,545)   (1,728)    (1,448)
                                      --------   --------   --------
   Accumulated deficit end
     of year                      $    (76,291) $ (9,746)   $(8,018)
                                      ========   ========   ========


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

   <PAGE>

                        STATEMENT OF FINANCIAL CONDITION


                          December 31           1997                1996
                                                       (thousands)

   Assets

   Cash and short-term investments         $      699          $    1,568
   Trade receivables, net (Note 3)                683                 652
   Inventories, net                               101                  93
   Other current assets                           121                 136
                                               ------              ------
       Total Current Assets                     1,604               2,449


   Net property, plant and equipment
     (Note 4)                                   1,107                 937
                                             --------              ------
       Total Assets                       $     2,711               3,386
                                            =========          ==========

   Liabilities and Shareholders' Deficit

   Current maturities of long-term debt   $        38          $       54
   Trade accounts payable                         219                  82
   Accrued employee benefits                      123                 136
   Reserve for legal expenses                     174                  50
   Accrued pension liability (Note 9)          68,801               6,949
   Other current liabilities                      110                 356
                                             --------            --------
     Total Current Liabilities                 69,465               7,627

   Accrued pension liability (Note 9)               -               8,131
   Accrued postretirement benefit
     obligations (Note 9)                         990                 993
   Long-term debt (Note 6)                        240                 279
   Shareholders' deficit (Note 7)
     Common stock ($.15 par value, authorized
      2,000,000 shares, outstanding 1,003,028
      at December 31, 1997 and
      December 31, 1996)                          152                 152
     Capital in excess of par value             8,155               8,155
     Accumulated deficit (accumulated
      deficit of $424,208 eliminated on
      December 2, 1988)                       (76,291)             (9,746)
     Pension liability adjustment                   -             (12,205)
                                             --------            --------
       Total Shareholders' Deficit            (67,984)            (13,644)

   Commitments and contingent
     liabilities (Note 10)
       Total Liabilities and Shareholders'
        Deficit                             $   2,711          $    3,386
                                            =========          ==========

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

   <PAGE>

   <TABLE>

                                                       STATEMENT OF CASH FLOWS
   <CAPTION>


             Year Ended December 31                  1997                 1996               1995
                                                                      (thousands)
   <S>                                            <C>                    <C>               <C>
   Cash flows from operating activities:
     Net loss $                                   $(66,545)              $(1,728)          $(1,448)
     Adjustments to reconcile net loss to
      net cash (used) provided by operating
      activities:
        Depreciation and amortization                  131                    92               112
        Changes in working capital:
         (Increase) decrease in receivables, net       (31)                  241               240
         (Increase) decrease in inventories             (8)                   35               (34)
        Decrease (increase) in other current assets     15                   106               (21)
        Increase (decrease) in trade accounts
          payable                                      137                     9              (128)
        Decrease in other current  liabilities        (135)                 (137)              (42)
        Increase in accrued pension liability       65,926                 1,217             1,067
      Other                                             (3)                  (27)              (13)
                                                  --------             ---------         ---------
   Net cash used by operating activities              (513)                 (192)             (267)

   Cash flows from investing activities:
     Capital expenditures                             (304)                 (127)             (116)
     Proceeds from sale of excess equipment              3                     5                 6
                                                  --------             ---------         ---------
        Net cash used by investing activities         (301)                 (122)             (110)

   Cash flows from financing activities:
     Net proceeds from issuance of long-term
       debt                                              -                   311                67
   Payment of long-term debt                           (55)                 (310)              (34)
                                                  --------             ---------         ---------
     Net cash provided (used) by
       financing activities                            (55)                    1                33
                                                  --------             ---------         ---------
   Net decrease in cash and  short-term
    investments                                       (869)                 (313)             (344)

   Cash and short-term investments at
    beginning of year                                1,568                 1,881             2,225
                                                  --------             ---------         ---------
   Cash and short-term investments at
    end of year                                  $     699              $  1,568          $  1,881
                                                  ========             =========         =========
   Supplemental information - interest
    paid                                         $      45              $     39          $     46
                                                  ========              ========         =========

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

   </TABLE>

   <PAGE>

   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   NOTE 1.  EMERGENCE FROM CHAPTER 11

   Allis-Chalmers Corporation (Allis-Chalmers or the Company) emerged from
   Chapter 11 proceedings on October 31, 1988 under a plan of reorganization
   which was consummated on December 2, 1988.  The Company was thereby
   discharged of all debts that arose before confirmation of its First
   Amended and Restated Joint Plan of Reorganization (Plan of
   Reorganization), and all of its capital stock was cancelled and made
   eligible for exchange for shares of common stock of the reorganized
   Company (Common Stock).

   Claims asserted against the Company and allowed by the Bankruptcy Court
   beyond those recorded prior to the consummation date amounted to
   approximately $483 million.  Such amounts were subsequently recorded by
   the Company in 1988.  Because total recorded liabilities discharged at
   consummation exceeded the book value of assets and Common Stock
   distributed to creditors and the various trusts at that date,
   extraordinary income of $388.1 million was recorded.

   See the Plan of Reorganization and the First Amended Disclosure Statement
   dated September 14, 1988 for additional information regarding
   distributions to holders of claims and interests.


   NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Description of Business

   Allis-Chalmers through its wholly-owned subsidiary, Houston Dynamic
   Service, Inc., services and repairs various types of mechanical equipment,
   including compressors, pumps, turbines, engines, heat exchangers,
   centrifuges, rollers, gears, valves, blowers, kilns, crushers and mills.

   Principles of Consolidation

   The consolidated financial statements include the accounts of Allis-
   Chalmers and its subsidiaries.  All significant intercompany transactions
   have been eliminated.

   Short-Term Investments

   Short-term investments consist primarily of government repurchase
   agreements and commercial paper with original maturities at date of
   purchase less than three months.

   Fair Value of Financial Instruments

   The carrying amounts in the Statement of Financial Condition for cash and
   short-term investments, trade receivables and long-term debt approximate
   their fair market value.

   Inventories

   Inventories are stated at the lower of cost, determined by the first-in,
   first-out method, or market.

   Properties and Depreciation

   Plant and equipment used in the business are stated at cost and
   depreciated on the straight-line basis over the estimated useful lives of
   the assets which generally range from 40 years for buildings, 3 to 12
   years for machinery and equipment and 3 to 12 years for tools, patterns,
   furniture and fixtures.  Maintenance and repairs are expensed as incurred.
   Expenditures which significantly increase asset values or extend useful
   lives are capitalized.

   Income Taxes

   Deferred income taxes are determined on the liability method in accordance
   with Statement of Financial Accounting Standards (FASB) No. 109.  See Note
   5. Income Taxes.

   (Loss) Income Per Common Share

   In February, 1997, the Financial Accounting Standards Board ("FASB")
   issued Statement of Financial Accounting Standards ("SFAS") No. 128,
   "Earnings Per Share."  This statement establishes revised standards for
   computing and presenting earnings per share and has been adopted by the
   Company during the fourth quarter of 1997.  Given the fact that the
   Company did not have any common stock equivalents over the past several
   years, its (loss) income per common share remain unchanged as basis and
   diluted per share amounts are identical.  As such, the adoption of this
   statement, did not impact the historically reported (loss) income per
   common share amounts.

   Statement of Cash Flows

   For purposes of the Statement of Cash Flows, the Company considers all
   highly liquid debt instruments with a maturity of three months or less at
   date of purchase to be cash equivalents.

   Use of Estimates

   The preparation of financial statements in conformity with generally
   accepted accounting principles requires management to make estimates and
   assumptions that affect the reported amounts of assets and liabilities and
   disclosure of contingent assets and liabilities at the date of the
   financial statements, and the reported amounts of revenues and expenses
   during the reporting period.  Actual results could differ from those
   estimates.

   Major Customers

   In 1997, 1996 and 1995 Amoco Chemical was the only customer which
   accounted for 10% or more of total sales -- 12% of 1997 sales, 16% of 1996
   sales and 26% in 1995.

   NOTE 3.  RECEIVABLES

                        December 31              1997        1996
                                                    (thousands)
   Trade accounts receivable                     $   719    $   682
   Allowance for doubtful receivables                (36)       (30)
                                                 -------     ------
                                                 $   683    $   652
                                                 =======     ======


   NOTE 4.  PROPERTY, PLANT AND EQUIPMENT

                        December 31              1997         1996
                                                    (thousands)
   Land and buildings                            $   545    $   545
   Machinery and equipment                         1,426      1,339
   Tools, patterns, furniture, fixtures
     and leasehold improvements                      582        441
                                                 -------     ------
                                                   2,553      2,325
   Accumulated depreciation                       (1,446)    (1,388)
                                                 -------     ------
                                                 $ 1,107    $   937
                                                 =======     ======


   NOTE 5.  INCOME TAXES

   Temporary differences are differences between the tax basis of assets and
   liabilities and their reported amounts in the financial statements that
   will result in differences between income for tax purposes and income for
   financial statement purposes in future years.  A valuation allowance is
   established for deferred tax assets when management, based upon available
   information, considers it more likely than not that a benefit from such
   assets will not be realized.

   The following table depicts the temporary differences as of December 31,
   1997 and 1996:

                                                    1997       1996
                                                       (millions)

   Net future tax deductible items               $    36    $    13
   Net operating loss carryforwards
     and other tax credits                           188        189
   Valuation allowance                              (224)      (202)
                                                 --------    ------
   Net deferred taxes                            $     0    $     0
                                                 ========    ======

   Net future tax deductible items relate primarily to estimated future
   bankruptcy claim payments to be made by the Company's two grantor trusts.
   Gross deferred tax liabilities at December 31, 1997 are not material.

   The Plan of Reorganization established the A-C Reorganization Trust to
   settle claims and to make distributions to creditors and certain
   shareholders.  The Company transferred cash and certain other property to
   the A-C Reorganization Trust on December 2, 1988.  Payments made by the
   Company to the A-C Reorganization Trust do not generate tax deductions for
   the Company upon the transfer but generate deductions for the Company as
   payments are made by the A-C Reorganization Trust to holders of claims.

   The Plan of Reorganization also created a trust to process and liquidate
   product liability claims.  Payments made by the A-C Reorganization Trust
   to the product liability trust do not generate current tax deductions for
   the Company.  Future deductions will be available to the Company as the
   product liability trust makes payments to liquidate claims.

   The Company believes the above-named trusts are grantor trusts and
   therefore includes the income or loss of these trusts in the Company's
   income or loss for tax purposes, resulting in an adjustment of the tax
   basis of net operating and capital loss carryforwards.  The income or loss
   of these trusts is not included in the Company's results of operations for
   financial reporting purposes.

   Tax carryforwards at December 31, 1997 are estimated to consist of net
   operating losses of $510 million expiring 1998 through 2009, investment
   tax credits of $7 million expiring 1998 through 2001 and energy tax
   credits of $3 million expiring 1998 through 2001.

   During 1990, the Company initiated litigation against the Internal Revenue
   Service (IRS) in the United States Bankruptcy Court for the Southern
   District of New York, challenging the validity and retroactive
   applicability of proposed regulations issued by the IRS on August 13,
   1990.  On January 2, 1992 the IRS issued final regulations under Sections
   269 and 382 of the Internal Revenue Code of 1986 relating to the use of
   net operating loss carryforwards following corporate reorganizations under
   the Bankruptcy Code.

   Following issuance of the final regulations the Company withdrew its
   retroactivity challenge because the final regulations were made
   retroactive only to August 14, 1990 and are not applicable to a plan of
   reorganization that was completed before then.  The Company's Plan of
   Reorganization was consummated on December 2, 1988.  The Company, however,
   continued to challenge the validity of other provisions of the
   regulations.

   On June 8, 1992, the Bankruptcy Court issued a decision denying the
   Company's motion for a judgment against the IRS with respect to the
   application of Section 269 of the IRS Code to the Company.  The Court also
   granted the IRS's motion to dismiss the Company's complaint challenging
   the regulations.  The Court entered judgment pursuant to its decision on
   June 29, 1992 and, consistent with the advice of its counsel, the Company
   decided not to appeal that judgment.

   Although the Company was unable to obtain a judgment that would have
   prevented the IRS from applying Section 269 to the Company, the Court's
   ruling leaves the Company in substantially the same position it was in
   prior to issuance of the final regulations.  The possibility of an IRS
   challenge under Section 269 of the Internal Revenue Code to the Company's
   use of its prepetition net operating loss carryforwards has always existed
   and, in light of the Court's ruling, that possibility continues to exist.

   The Court, however, stated that, should the IRS ever seek to use its new
   Section 269 regulations to limit the Company's use of its net operating
   loss carryforwards, nothing in its opinion would prejudice the Company's
   right to defend itself by using the Court's confirmation finding that the
   primary purpose of the Company's Plan of Reorganization was not tax
   avoidance.  While the Company's Common Stock is subject to trading
   restrictions which are designed to maximize the likelihood of preserving
   its net operating loss carryforwards, a change in ownership of the
   Company could also limit the use of its net operating loss carryforwards.

   NOTE 6.  LONG-TERM DEBT

                        December 31               1997       1996
                                                    (thousands)

   Real estate loan                              $   248    $   267
   Other                                              30         66
                                                  ------    -------
                                                     278        333
   Less amounts classified as current                 38         54
                                                 -------     ------
                                                 $   240    $   279
                                                 =======     ======


   The real estate loan relates to the 1990 purchase of the land and building
   in Houston, Texas which had previously been leased by HDS.  In August
   1996, HDS refinanced this loan which is required to be repaid in monthly
   installments of $3,278 through August 20, 2001 when the remaining unpaid
   balance shall be due.  At December 31, 1997 and 1996, the interest rate on
   the note was 10.5% and 10.25%, respectively.  The rate will be adjusted
   during the term of the note in accordance with increases or decreases in
   the prime rate.  The note is secured by the HDS facility having a net book
   value of $456,000 at December 31, 1997 and the Company's guaranty.


   NOTE 7.  SHAREHOLDERS' DEFICIT

   The components of Shareholders' Deficit are as follows:

                        December 31              1997         1996
                                                   (thousands)

   Common stock                                 $    152   $    152
   Capital in excess of par value                  8,155      8,155
   Accumulated deficit                           (76,291)    (9,746)
   Pension liability adjustment                        -    (12,205)
                                                 -------     ------
          Shareholders' Deficit                 $(67,984)  $(13,644)
                                                 =======    =======

   Statement of Financial Accounting Standards No. 87, "Employers' Accounting
   for Pensions," requires recognition in the Statement of Financial
   Condition of a minimum pension liability.  The minimum pension liability
   that must be recognized is equal to the excess of the accumulated benefit
   obligation over plan assets.  A reduction of shareholders' investment in
   the amount of $12.2 million in 1996 was recorded.  This unfunded amount
   was recognized as expense in 1997 in connection with the distress
   termination of the Consolidated Plan and recognition of the
   Company's liability to the PBGC.


   NOTE 8.  LONG-TERM STOCK INCENTIVE PLAN

   The Company's Long-Term Stock Incentive Plan (1989) provides for the grant
   of stock options, stock appreciation rights, performance shares,
   restricted stock, restricted stock units and other stock-based awards.
   Under the plan the maximum number of shares which may be granted with
   respect to stock-based awards is 50,000.  Options may be granted at prices
   equal to or not less than the fair market value at date of grant, except
   that options to purchase up to 13,333 shares may be granted at a price
   which is not less than the fair market value on October 25, 1989, the date
   on which the plan was approved by shareholders.  Options are exercisable
   within a period not to exceed 10 years from date of grant.  The plan also
   provides for the discretionary grant of stock appreciation rights which
   allow the holder to receive in cash or shares of common stock the
   difference between the exercise price and the fair market value of the
   stock at the date of exercise.  There have been no grants under the plan.


   NOTE 9.  POSTRETIREMENT BENEFIT OBLIGATIONS

   Pensions

   As of the date of the Chapter 11 filings in June 1987, the Company
   sponsored 19 defined benefit plans providing pensions for substantially
   all U.S. employees.  The pension plan for U.S. salaried employees was
   capped and frozen effective March 31, 1987, so there have been no further
   benefit accruals after that date.  As a result of divestitures during the
   Chapter 11 proceedings, eight active plans were transferred to the buyers
   of the businesses, leaving the Company as sponsor of 11 plans, none of
   which permitted additional benefit accruals.  Effective January 1, 1989
   the 11 remaining plans were consolidated into a single plan, the Allis-
   Chalmers Consolidated Pension Plan (Consolidated Plan).

   In accordance with the Plan of Reorganization, the 11 plans received a
   Company contribution of $53.8 million in December 1988.  As a result of
   actions taken in connection with this contribution and the then-existing
   securities of the pension plans, the assets of the Consolidated Plan were
   invested in a dedicated bond portfolio that consisted of high-grade fixed
   income securities in which the market value of the assets was matched to
   the present value of the anticipated pension benefits and administrative
   expenses of the Consolidated Plan in a way intended to make the pension
   fund immune from interest rate fluctuations.

   Under the Plan of Reorganization, future contributions to the Consolidated
   Plan were required if the mortality assumptions used in calculating the
   present value of the pension benefits expected to be paid or the
   assumptions used in calculating the future administrative expenses proved
   inaccurate.  For the years 1989 through 1993, retirees eligible for
   benefits under the Consolidated Plan, as a group, outlived the projections
   of the mortality assumptions used in the Plan of Reorganization for
   funding the Consolidated Plan.  For the same five years, actual
   administrative expenses were slightly in excess of assumed levels.
   Effective January 1, 1994, the Company's independent actuaries reflected
   such decreased mortality for funding calculation purposes.  For the years
   1994 through 1996, the mortality experience was negative compared with the
   revised assumptions, in an amount in excess of the 1989-1993 average
   actuarial loss.  This mortality loss was partially offset, however, by
   gains in the asset portfolio.

   This underfunded condition in the Consolidated Plan required the Company
   to make significant cash contributions to the Consolidated Plan pursuant
   to the Employment Retirement Income Security Act of 1974, as "amended"
   (ERISA) funding requirements starting in 1996.

   The Company failed to make required quarterly contributions starting in
   April 1996, resulting in the filing of a lien by the Pension Benefit
   Guaranty Corporation (PBGC) against the Company.  Given the inability of
   the Company to fund such obligations with its lack of 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  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.

   In September 1997, Allis-Chalmers and the PBGC entered into an agreement
   in principle for the settlement of the PBGC Liability (the PBGC
   Agreement).  The PBGC Agreement calls for the PBGC to release Allis-
   Chalmers and its subsidiaries from the PBGC Liability in return for that
   number of shares of Allis-Chalmers' common stock that represents 35% of
   the total number of shares issued and outstanding on a fully-diluted
   basis.

   The PBGC Agreement is subject to negotiation of definitive documentation
   and to satisfactory resolution of Allis-Chalmers' 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 percent 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 percent 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 Allis-Chalmers 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
   have resulted, or will result, in first-tier taxes under Code section
   4971(a) of approximately $900,000.  This amount has been accrued by the
   Company at December 31, 1997.

   On March 2, 1998, Allis-Chalmers sent the IRS a formal Offer in Compromise
   of the Company's tax liability under Code section 4971.  If accepted by
   the IRS, the Offer in Compromise will (i) require Allis-Chalmers to pay
   the IRS $25,000, plus interest from March 2, 1998 and (ii) extinguish the
   Company's tax liability under Code section 4971, subject to the standard
   conditions attendant to an Offer in Compromise.

   Although the IRS has not yet responded to the Offer in Compromise, Allis-
   Chalmers' management is hopeful that a mutually acceptable settlement can
   be achieved.  If a satisfactory settlement cannot be reached with IRS, or
   if definitive documentation of the PBGC Agreement is not achieved for any
   other reason, Allis-Chalmers will evaluate other alternatives, including a
   bankruptcy filing.

   Medical and Life

   Pursuant to the Plan of Reorganization, the Company assumed the
   contractual obligation to Simplicity Manufacturing, Inc. (SMI) to
   reimburse SMI for 50% of the actual cost of medical and life insurance
   claims for a select group of retirees (SMI Retirees) of the prior
   Simplicity Manufacturing Division of Allis-Chalmers.

   Net postretirement benefit expense for the years ended December 31, 1997,
   1996 and 1995 included the following components (in thousands):

                                          1997     1996        1995

   Service cost                        $     -   $     -    $     -
   Interest cost on accumulated
     benefit obligation                     62        54         59
   Amortization of unrecognized
     net gain                               (3)      (17)       (24)
                                       -------    ------     ------

   Net postretirement benefit
     expense                           $    59   $    37         35
                                       =======    ======     ======

   Presently, the Company's postretirement benefit obligations are not
   funded.  The status of the Company's postretirement benefit obligations as
   of December 31, 1997 and 1996 was as follows (in thousands):

                                                  1997        1996
   Actuarial present value of
     accumulated postretirement
     benefit obligation                          $   733    $   867
   Unrecognized net gain                             257        126
                                                 --------   -------
   Accrued postretirement benefit
     liability                                   $   990    $   993
                                                 ========   =======

   The assumed health care cost trend rate used in measuring the accumulated
   postretirement benefit obligation was 7.0% at December 31, 1997 and 7.5% at
   December 31, 1996.  The assumed rate in 1998 decreases 1/2% per year
   until an ultimate rate of 5.0% is reached at December 31, 2001.  The
   health care cost trend rate has a significant effect on the amounts
   reported.  For example, a one percentage point increase in the health care
   cost trend rate would increase the accumulated postretirement benefit
   obligation by approximately $100,000 at December 31, 1997.  The discount
   rate used in determining the accumulated postretirement benefit obligation
   was 7.50% at December 31, 1997 and December 31, 1996.

   NOTE 10.  COMMITMENTS AND CONTINGENT LIABILITIES

   Substantially all litigation proceedings pending against the Company were
   resolved pursuant to emergence from the Chapter 11 proceedings in
   1988.Various loans, lease agreements and other commitments and contractual
   obligations of the Company were also satisfied pursuant to the Plan of
   Reorganization.  The Company knows of no significant pre-Plan of
   Reorganization lawsuits presently pending against it or its subsidiaries
   which have not been assumed by the various trusts or other entities.

   The Company is a party to litigation matters and claims which are normal
   in the course of its operations, and, while the results of litigation and
   claims cannot be predicted with certainty, management believes that the
   final outcome of such matters will not have a material adverse effect on
   the Company's consolidated financial position.

   Environmental Matters

   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.

   Allis-Chalmers Consolidated Pension Plan

   Contributions to the Consolidated Plan were required starting in 1996 due
   to a change in the mortality assumptions used in calculating the present
   value of the pension benefits expected to be paid and the assumptions used
   in calculating the future administrative expenses compared with the
   projections of the mortality and administrative expense assumptions used
   in the Plan of Reorganization for funding the Consolidated Plan.
   Contributions were projected to be $2.5 million in 1996, then increasing
   to $3.1 million in 1997 and $8.1 million in 1998.   After making one
   installment of $205,000 on January 15, 1996, the Company failed to make
   any subsequent installments.  The Company's failure to make required
   quarterly contributions starting in April 1996, resulted in the filing of
   a lien by the PBGC against the Company.  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 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 this PBGC
   Liability totals 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 (the PBGC
   Agreement).  The PBGC Agreement calls for the PBGC to release Allis-
   Chalmers and its subsidiaries from the PBGC Liability in return for that
   number of shares of Allis-Chalmers' common stock that represents 35% of
   the total number of shares issued and outstanding on a fully-diluted
   basis.

   The PBGC Agreement is subject to negotiation of definitive documentation
   and to satisfactory resolution of Allis-Chalmers' 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
   percent 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 percent 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 Allis-Chalmers 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
   have resulted, or will result, in first-tier taxes under Code section
   4971(a) of approximately $900,000.  This amount has been accrued by the
   Company at December 31, 1997.

   On March 2, 1998, Allis-Chalmers sent the IRS a formal Offer in Compromise
   of the Company's tax liability under Code section 4971.  If accepted by
   the IRS, the Offer in Compromise will (i) require Allis-Chalmers to pay
   the IRS $25,000, plus interest from March 2, 1998, and (ii) extinguish the
   Company's tax liability under Code section 4971, subject to the standard
   conditions attendant to an Offer in Compromise.

   Although the IRS has not yet responded to the Offer in Compromise, Allis-
   Chalmers' management is hopeful that a mutually acceptable settlement can
   be achieved.  If a satisfactory settlement cannot be reached with IRS, or
   if definitive documentation of the PBGC Agreement is not achieved for any
   other reason, Allis-Chalmers will evaluate other alternatives, including a
   bankruptcy filing.

   NOTE 11.  RELATED PARTY TRANSACTIONS

   H. Sean Mathis, Chairman of the Board and Chief Executive Officer,
   Leonard Toboroff, Vice Chairman of the Board and Executive Vice President
   and John T. Grigsby, Jr., Vice Chairman of the Board, Executive Vice
   President and Chief Financial Officer, did not receive any compensation
   for their services as executive officers of the Company for the three
   years ended December 31, 1997.

   <TABLE>

   NOTE 12.  QUARTERLY FINANCIAL DATA
     (unaudited)
   <CAPTION>                         First                       Second                  Third                Fourth
                                    Quarter                      Quarter                Quarter               Quarter
                               1997            1996         1997        1996         1997*     1996        1997        1996
                                                            (thousands, except per share)
   <S>                        <C>              <C>          <C>        <C>           <C>       <C>        <C>           <C>
   Sales                      $1,028           $985         $985       $1,156        $813      $968       $1,236        $951
   Gross Margin                  211            290          268          342         161       176          374         252

   Net Loss                     (604)          (339)        (554)        (378)    (65,187)     (461)        (200)       (550)

   Loss per Share (basic
    and diluted)                (.60)          (.34)        (.55)        (.38)     (64.99)     (.46)        (.20)       (.54)


   *Net loss and loss per share amounts have been restated compared with amounts previously reported by the Company to reflect
    the termination of the Consolidated Plan and recognition of the related liability to the PBGC as of September 30, 1997.

   </TABLE>

   ITEM 9.  CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE.

   None.


                                    PART III


   ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

   (a)  Identification of Directors

        The following individuals were elected as directors of the Company at
        the meeting of shareholders on October 25, 1989 (or have been
        appointed to fill vacancies caused by the resignation of two such
        directors) to serve until the next meeting of shareholders.

        John R. Collins, age 70, a director since December 1988.  Mr. Collins
        retired in 1989 after serving since 1985 as Administrative Assistant
        to the Secretary-Treasurer of International Union, United Automobile,
        Aerospace & Agricultural Implement Workers of America -- UAW.

        John T. Grigsby, Jr., age 57, a director since December 1988.
        Mr. Grigsby has been a Vice Chairman of the Board of the Company
        since May 1989, an Executive Vice President since October 1989 and
        Chief Financial Officer since January 1996, having previously served
        since December 1988 as the Company's Chairman and Chief Executive
        Officer.  Prior to that time and since July 1987, Mr. Grigsby was
        employed by the Company as Managing Director, Restructure Project.
        Mr. Grigsby also serves as the A-C Reorganization Trustee, as
        President of Thomson McKinnon Securities, Inc. during winddown and
        liquidation of its affairs and President and Chief Executive Officer
        of N.W. Liquidating, Inc.  He has been a director of 1st Southern
        Bank of Boca Raton, Florida since September 1987, First Florida
        Industries, Inc. since July 1985 and Navistar International
        Corporation since 1997.

        H. Sean Mathis, age 50, a director since December 1988.  Mr. Mathis
        was elected as Chairman and Chief Executive Officer of the Company on
        January 16, 1996 and prior thereto Mr. Mathis served as a Vice
        President of the Company since July 1989.  From July 1996 to
        September 1997, Mr. Mathis was Chairman of the Board of Universal Gym
        Equipment Inc., a privately owned company (Universal).  In July 1997,
        Universal filed for protection under Federal Bankruptcy Laws.  In
        September 1997, Mr. Mathis resigned as Chairman of the Board of
        Universal.  From 1991 to 1993, Mr. Mathis was President of RCL
        Acquisition Corp., the predecessor firm of HMG.  From 1993 to 1995,
        Mr. Mathis was President and a Director of RCL Capital Corporation,
        which was merged into DISC Graphics in November 1995.  From 1988 to
        October 1993, Mr. Mathis was a Director and Chief Operating Officer
        of Ameriscribe Corporation (Ameriscribe), a national provider of
        reprographic and related facilities management services.  From August
        1992 to May 1994, Mr. Mathis acted as the Federal Court Appointed
        Trustee for International Wire News Service Liquidation Corp.,
        formerly United Press International (UPI).  From November 1991
        through July 1992, Mr. Mathis was Vice Chairman and Director of UPI
        (then a news syndication service).  In August 1992, as a part of a
        restructuring program, UPI filed for protection under the Federal
        Bankruptcy Laws.  Mr. Mathis is also a Director of Thousand Trails,
        Inc., an operator of recreational parks.

        Claude D. Montgomery, age 45, a director since December 1988.  Since
        November 1996, Mr. Montgomery has been a partner in Phillips Lytle
        Hitchcock Blaine & Huber, a law firm.  From June 1993 to October
        1996, Mr. Montgomery was a director and shareholder in Marcus
        Montgomery P.C., a law firm, formerly known as Marcus Montgomery
        Wolfson P.C.  Mr. Montgomery was a director and shareholder in Varet,
        Marcus & Fink P.C., formerly known as Milgrim, Thomajan & Lee P.C.,
        attorneys, New York, from August 1989 through June 1993.

        Robert E. Nederlander, age 64, a director since May 1989.
        Mr. Nederlander was elected by the Board of Directors on November 16,
        1993 to serve as a Vice Chairman of the Board, having previously
        served as Chairman of the Board and Chief Executive Officer of the
        Company since May 1989.  He resigned as Vice Chairman on October 18,
        1996.  He is also President and director of Nederlander Organization,
        Inc., New York, an owner and operator of one of the world's largest
        chains of  theaters, since November 1981; President of  Nederlander
        Television and Film Productions, Inc. since October 1985; Partner in
        the New York Yankees Baseball Club since 1973 and Managing General
        Partner from September 13, 1990 through December 31, 1991; director
        and Chairman of the Board of  Riddell Sports, Inc. since April 1988;
        Chairman of the Board of MEGO Financial Corporation since January
        1988; and a director of MEGO Mortgage Corp., News Communications,
        Inc. and HFS Incorporated since 1995 (which was merged into Cendant
        in 1997).

        John E. Sundman, age 71, a director since December 1988.  Mr. Sundman
        retired in December 1991 as Vice President of Corcap, Inc., Hartford,
        Connecticut, a position which he held since July 1988, when Corcap
        was spun off by Lydall, Inc., Manchester, Connecticut.  He remains a
        director of Corcap, Inc.

        Allan R. Tessler, age 61, a director since September 1992.  Mr.
        Tessler served as Chairman of the Board and Chief Executive Officer
        of the Company from November 1993 until January 1996.   Mr. Tessler
        is Chairman of the Board and Chief Executive Officer of International
        Financial Group, Inc. since 1987; and Co-Chief Executive Officer of
        Data Broadcasting Corporation since June 1992.  Mr. Tessler is also
        Chairman of the Board of  Enhance Financial Services Group, Inc. and
        Jackpot Enterprises, Inc. and director of The Limited, Inc.

        Leonard Toboroff, age 64, a director since May 1989.  Mr. Toboroff
        has been a Vice Chairman of the Board and an Executive Vice President
        of the Company since May 1989; a director and Vice Chairman of
        Riddell Sports, Inc. from April 1988 to the present; a practicing
        attorney continuously since 1961 to the present; a director since
        August 1987 and former Chairman and Chief Executive Officer from
        December 1987 to May 1988 of Ameriscribe; and formerly a director,
        Chairman and Chief Executive Officer from May 1982 through June 1982
        and Vice Chairman June 1982 through September 1988 of American
        Bakeries Company.  Mr. Toboroff is also a director of Banner
        Aerospace, Inc. and Saratoga Beverage, Inc.

   (b)  Identification of Executive Officers


       Name, Age as of March 1,
        1998, and Position                      Business Experience

       H. Sean Mathis, 50,                See Item 10, subsection (a) above.
       Chairman of the Board and
       Chief Executive Officer

       Leonard Toboroff, 64,              See Item 10, subsection (a) above.
       Vice Chairman of the Board
       and Executive Vice
       President

       John T. Grigsby, Jr., 57,          See Item 10, subsection (a) above.
       Vice Chairman of the Board,
       Executive Vice President and
       Chief Financial Officer

       Jeffrey I. Lehman, 48,             Mr. Lehman commenced his
       Treasurer                          employment with
                                          Allis-Chalmers and was elected to
                                          his current position in February
                                          1996.  Since 1991, Mr. Lehman has
                                          been employed by the A-C
                                          Reorganization Trust and Thomson
                                          McKinnon Securities during
                                          winddown and liquidation of their
                                          affairs.  He has also provided
                                          financial consultation since 1985.

       William L. Vaitl, 64,              Mr. Vaitl commenced his employment
       Secretary & Assistant Treasurer    with Allis-Chalmers in July 1962
                                          serving in a number of management
                                          positions including Assistant
                                          Treasurer.  From December 1988 to
                                          the present, Mr. Vaitl has been
                                          employed by the A-C Reorganization
                                          Trust.  In February 1996, he was
                                          reappointed Assistant Treasurer
                                          and in April 1997, elected as
                                          corporate Secretary.

   (c) Identification of Certain Significant Employees

       None

   (d) Family Relationships

       None

   (e) Business Experience

       See this Item 10, subsections (a) and (b) above.

   (f) Involvement in Certain Legal Proceedings

       None

   (g) Promoters and Control Persons

       Not applicable

   ITEM 11.  EXECUTIVE COMPENSATION.

   EXECUTIVE COMPENSATION

   No executive officer earned in excess of $100,000 in 1997.  H. Sean Mathis
   who served as Chairman of the Board and Chief Executive Officer in 1996
   and 1997, respectively, received no compensation.

   LONG-TERM STOCK INCENTIVE PLAN

   The Company's Long-Term Stock Incentive Plan (1989), adopted by the
   shareholders at the 1989 shareholders meeting, provides for grants to
   officers and key employees of stock options, stock appreciation rights,
   performance shares, restricted stock, restricted stock units and other
   stock-based awards.  The maximum number of shares which may be granted
   with respect to stock-based awards is 50,000.  Options to purchase shares
   may be granted at prices equal to not less than the fair market value at
   the date of grant, except that options to purchase up to 13,333 shares may
   be granted at a price which is not less than the fair market value on
   October 25, 1989, the date on which the Stock Incentive Plan was approved
   by shareholders.  Options are exercisable within a period not to exceed 10
   years from date of grant.  Stock appreciation rights allow the holder to
   receive the difference between the exercise price and the fair market
   value of the stock at the date of exercise in cash or shares of common
   stock.  No stock options or stock appreciation rights have been granted to
   date.


   RETIREMENT PLAN

   The Consolidated Plan covered 6 active employees at the beginning of 1997.
   The Consolidated Plan is a tax qualified defined benefit pension plan.
   Effective March 31, 1987, the Consolidated Plan was capped and frozen,
   without further increase in benefits provided by the Company after that
   date.

   The retirement benefits paid under this plan are before any adjustment for
   a surviving spouse's pension and are not subject to Social Security offset
   or other deductions.

   SAVINGS PLAN

   The Company's Savings Plan was initiated in 1968.  The Savings Plan
   permits the Company to contribute in its discretion cash or stock to
   participants' accounts.  However, on June 1, 1985 the Company discontinued
   contributions to the Savings Plan.  Employees may terminate voluntary
   participation in certain portions of the Savings Plan and withdraw their
   voluntary after tax contributions at any time.  However, there are
   restrictions on withdrawals of the Company matching contributions.

   Upon retirement, death or other termination of employment, employee
   account balances generally may be withdrawn in lump sum or in
   installments.  Withdrawal of contributions is also permitted for defined
   hardships.

   During 1997 contributions by Company participants to the Savings Plan
   under Section 401(k) of the Internal Revenue Code totaled $60,639.  At
   December 31, 1997 there were a total of 192 participants in the Savings
   Plan, of whom 19 were active employees of the Company.

   Due to the significant administrative costs associated with the Savings
   Plan, on December 22, 1997, the Company filed an Application for
   Determination for Terminating the Savings Plan with the IRS.  Remaining
   participants in the Savings Plan were notified of the termination which is
   projected to be effective April 8, 1998.  The Company is proceeding with
   the termination process.


   COMPENSATION OF DIRECTORS

   Since December 1, 1990, the annual retainer for services as a director
   (previously $13,500 per year) has been suspended, the attendance fee for
   each Board meeting attended was reduced from $425 to $100 and the
   attendance fee for each Committee meeting was suspended.


   TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT

   None.


   ITEM 12.  SECURITY OWNERSHIP OF CERTAIN
                     BENEFICIAL OWNERS AND MANAGEMENT.

   (a) Security Ownership of Certain Beneficial Owners

       The following table lists the beneficial ownership with respect to
       all persons known to the Company to be the beneficial owner of more
       than 5% of the Company's Common Stock as of March 1, 1998.

                                      Amount and Nature     Percent of
           Name and Address             of Ownership          Class

       AL-CH Company, L.P., 810 Seventh
       Avenue, New York, NY  10019
       (includes shares held by Messrs.
       Nederlander and Toboroff
       as described below)                407,251(1)           40.6%

       Wells Fargo Bank, P.O. Box 60347,
       Los Angeles, CA  90060, Trustee
       under that certain Amended and
       Restated Retiree Health Trust
       Agreement for UAW Retired
       Employees of Allis-Chalmers
       Corporation                        136,406              13.6%

       Firstar Trust Company,
       777 East Wisconsin Avenue,
       Milwaukee, WI  53202, Trustee
       under that certain Amended and
       Restated Retiree Health Trust
       Agreement for Non-UAW Retired
       Employees of Allis-Chalmers
       Corporation                        101,977              10.2%

       (1) Messrs. Nederlander and Toboroff are beneficial owners of and
           have shared voting power and shared dispositive power over the
           407,251 shares of common stock held by AL-CH Company, L.P., a
           Delaware limited partnership, of which the general partners are
           Q.E.N., Inc., a Michigan corporation controlled by Mr.
           Nederlander, and Lenny Corp., a Delaware corporation controlled
           by Mr. Toboroff.  Mr. Allan R. Tessler is a limited partner in
           AL-CH Company, L.P.

   (b) Security Ownership of Management

       The following table sets forth the number of shares of common stock
       of the Company beneficially owned as of March 1, 1998 by directors
       and all directors and executive officers as a group.  Except as
       otherwise noted in the footnotes, the persons listed have sole voting
       and investment power over the shares beneficially owned.


                                           Amount and Nature     Percent of
                  Name                        of Ownership         Class

       John R. Collins                              0                *
       John T. Grigsby, Jr.                     9,535              1.0%
       H. Sean Mathis                               0                *
       Claude D. Montgomery                       533(1)             *
       Robert E. Nederlander                  407,251(2)         40.6%(2)
       John E. Sundman                          3,333                *
       Allan R. Tessler                             0                *
       Leonard Toboroff                       407,251(2)         40.6%(2)

       All directors and
       officers as a group
       (nine persons)                         420,652             42.0%

       *less than 1%

       (1) Shares are owned beneficially by Mr. Montgomery's spouse as to
           which he disclaims beneficial ownership.

       (2) Messrs. Nederlander and Toboroff are beneficial owners of and
           have shared voting power and shared dispositive power over the
           407,251 shares of common stock held by AL-CH Company, L.P., a
           Delaware limited partnership, of which the general partners are
           Q.E.N., Inc., a Michigan corporation controlled by Mr.
           Nederlander, and Lenny Corp., a Delaware corporation controlled
           by Mr. Toboroff.  Mr. Allan R. Tessler is a limited partner in
           AL-CH Company, L.P.

   (c) Changes in Control

       None


   ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   (a) Transactions with Management and Others

       None

   (b) Certain Business Relationships

       None

   (c) Indebtedness of Management

       None

   (d) Transactions with Promoters

       Not applicable

                                     PART IV


   ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
             AND REPORTS ON FORM 8-K.

   (a)            List of Documents Filed.  The Index to Financial Statements
                  and Financial Schedule is included on page 15 of this
                  report.  Financial statements Schedules not included in
                  this report have been omitted because they are
                  not applicable or the required information is shown in the
                  Financial Statements or Notes thereto.

   (b)            Reports on Form 8-K.  There were no Reports on Form 8-K
                  filed in the fourth quarter of 1997.

   (c)            Exhibits:

                    2 .1.  First Amended Disclosure Statement pursuant to
                  Section 1125 of the Bankruptcy Code, which includes the
                  First Amended and Restated Joint Plan of Reorganization
                  dated September 14, 1988 (incorporated by reference to the
                  Company's Report on Form 8-K dated December 1, 1988).

                    3.1.  Amended and Restated Certificate of Incorporation
                  of Allis-Chalmers Corporation (incorporated by reference to
                  the Company's Report on Form 8-A dated August 12, 1992).

                    3.2.  By-laws of Allis-Chalmers Corporation (incorporated
                  by reference to the Company's Report on Form 8-A dated
                  August 12, 1992).

                  10.1.  Amended and Restated Retiree Health Trust Agreement
                  between Allis-Chalmers Corporation and Wells Fargo Bank
                  (incorporated by reference to Exhibit C-1 of the First
                  Amended and Restated Joint Plan of Reorganization dated
                  September 14, 1988 included in the Company's Report on Form
                  8-K dated December 1, 1988).

                  10.2.  Amended and Restated Retiree Health Trust Agreement
                  between Allis-Chalmers Corporation and Firstar Trust
                  Company (incorporated by reference to Exhibit C-2 of the
                  First Amended and Restated Joint Plan of Reorganization
                  dated September 14, 1988 included in the Company's Report
                  on Form 8-K dated December 1, 1988).

                  10.3.  Reorganization Trust Agreement between Allis-
                  Chalmers Corporation and John T. Grigsby, Jr., Trustee
                  (incorporated by reference to Exhibit D of the First
                  Amended and Restated Joint Plan of Reorganization dated
                  September 14, 1988 included in the Company's Report on Form
                  8-K dated December 1, 1988).

                  10.4.  Product Liability Trust Agreement between Allis-
                  Chalmers Corporation and Bruce W. Strausberg, Trustee
                  (incorporated by reference to Exhibit E of the First
                  Amended and Restated Joint Plan of Reorganization dated
                  September 14, 1988 included in the Company's Report on Form
                  8-K dated December 1, 1988).

                  10.5.*  Allis-Chalmers Corporation Long-Term Stock
                  Incentive Plan (1989) (incorporated by reference to the
                  Company's Report on Form 10-Q for the three months ended
                  September 30, 1989).

                  10.6.  Subscription and Shareholder Agreement between
                  Allis-Chalmers Corporation and AL-CH Company, L.P. dated
                  May 18, 1989 (incorporated by reference to the Company's
                  Report on Form 8-K dated May 24, 1989).

                  10.7.  Commercial Installment Loan Agreement by and between
                  Allis-Chalmers Corporation and Marine Midland Bank, N.A.,
                  dated as of December 20, 1989 (incorporated by reference to
                  the Company's Report on Form 8-K dated December 20, 1989).

                  10.8.*  Employment Agreement between Allis-Chalmers
                  Corporation and John T. Grigsby, Jr. (incorporated by
                  reference to the Company's Report on Form 10-Q for the
                  three months ended September 30, 1989).

                  10.9.*  Allis-Chalmers Savings Plan (incorporated by
                  reference to the Company's Report on Form 10-K for the year
                  ended December 31, 1988).

                  10.10.*  Allis-Chalmers Consolidated Pension Plan
                  (incorporated by reference to the Company's Report on Form
                  10-K for the year ended December 31, 1988).

                  21.1.  Subsidiaries of Allis-Chalmers Corporation.

                  27.1.Financial Data Schedule.

   *  A management contract or compensatory plan or arrangement.

   <PAGE>

   <TABLE>

            ALLIS-CHALMERS CORPORATION AND CONSOLIDATED SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
   <CAPTION>

                                   (thousands)


                              Balance at                                        Balance
      Year Ended               Beginning                                       at Close
   December 31, 1995          of Period        Additions     Deductions       of Period
   <S>                    <C>                   <C>          <C>           <C>
   Doubtful receivables   $          319        $      0     $       13    $        306


   Plant rearrangement    $           68        $      0     $        0    $         68
                              ----------        --------       --------     -----------

  <CAPTION>

                              Balance at                                        Balance
      Year Ended               Beginning                                       at Close
   December 31, 1996          of Period        Additions     Deductions       of Period
   <S>                    <C>                  <C>           <C>           <C>
   Doubtful receivables   $         306        $       0     $      276(a) $         30

   Plant rearrangement    $          68        $       0     $       68    $          0


   <CAPTION>

                             Balance at                                         Balance
      Year Ended              Beginning                                        at Close
   December 31, 1997         of Period         Additions       Deductions     of Period
   <S>                    <C>                 <C>            <C>            <C>
   Doubtful receivables   $         30        $        6     $        0     $        36



   (a) Includes writeoff of uncollectible receivables, less recoveries.

   </TABLE>

   <PAGE>

                                   SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
   Exchange Act of 1934, as amended, the registrant has duly caused this
   report to be signed on its behalf by the undersigned, thereunto duly
   authorized.

                                      Allis-Chalmers Corporation



                                      /s/John T. Grigsby, Jr.
                                      John T. Grigsby, Jr.
                                      Vice Chairman, Executive Vice
                                      President and Chief Financial Officer
                                      Date:  March 26, 1998


   Pursuant to the requirements of Section 13 or 15(d) of the Securities
   Exchange Act of 1934, as amended, this report has been signed on March 26,
   1998 by the following persons on behalf of the registrant and in the
   capacities indicated.







   /s/H. Sean Mathis                  /s/Robert E. Nederlander
   H. Sean Mathis                     Robert E. Nederlander, Director
   Chairman of the Board,
   Chief Executive Officer
   and Director



   /s/ John R. Collins                /s/John E. Sundman
   John R. Collins, Director          John E. Sundman, Director




   /s/John T. Grigsby, Jr.            /s/Allan R. Tessler
   John T. Grigsby, Jr. Director      Allan R. Tessler, Director



   /s/Claude D. Montgomery            /s/Leonard Toboroff
   Claude D. Montgomery, Director     Leonard Toboroff, Director