something like this: The pair of wires that was pinched on the steering wheel sprocket shorted and the hot wires crossed an engine control wire which tripped the breaker on the engine control box, but that left the ground side of those (thin wires) as the return circuit, which overloaded and melted whatever it contacted.

Once plastic insulation melts in a molded plastic component housing; all bets are off when it comes to circuit shorts.