A radial flux permanent magnet AC motor/generator employs a flat circular stator plate having a plurality of separately-formed electromagnets mounted in a ring pattern on a top surface thereof. A circular flux ring fabricated of powdered metal is mounted to the stator plate outside the ring of electromagnets. A plurality of permanent magnets are mounted in a ring pattern on the outer cylindrical surface of a steel rotor. The stator plate and rotor are axially and diametrically aligned such that the ring of permanent magnets rotates in close proximity to and inside the ring of electromagnets. The electromagnets utilize powder metal cores shaped to have rounded corners and flat sides that permit the use of heavier gauge windings and eliminate the air gaps that exist between the core and windings of prior art electromagnets.