[MOTORHEAD]

Whoa !! Major melt-down ! That orange wire is the output cable/terminal, and it was dead shorted to something !!! The fact the insulation was melted only a few inches tells me it was grounded some where near the alternator. Looking at the first pic, it looks like it shorted right to the alternator case, look for some black arc marks in that area. Insulation was probably touching metal and wore thru due to vibration and shorted(grounded ) on the engine or alternator. Lucky there was no fire !