Deep restructurings in the German chemical and auto sectors could pose severe tests for company managements and governance structures.

Germany has experienced a prolonged industrial downturn, with industrial production dropping 20% since its peak in 2017. The crisis, in our view, is structural, with overcapacity, high labor and energy costs, and falling productivity often cited by managements as reducing competitiveness versus global peers. In our view, unprecedented restructurings are needed, but will likely be very difficult to implement, given the strength of local trade unions and complex...

China’s potential response to the European Union’s likely tariffs on Chinese electric vehicles could hurt German carmakers in particular.

Tariffs on Chinese carmakers are becoming a hot topic in Europe, following the U.S. move last month to impose tariffs on imports of electric vehicles and batteries from China. Over the coming days, the EU Commission is expected to announce its own new tariffs on imported Chinese EVs, likely imposed as early as July, after an anti-subsidy investigation (started last October) found evidence of unfair practices by China.

Chinese EV makers have up to a 50%...

Although event risk is rising, the biggest deals look creditor-friendly, preserving credit quality and ratings.

After a long hiatus, mergers and acquisitions have resumed in the Basic Materials sector, with large deals announced in Mining and Paper & Packaging. After our earlier blog on rising M&A momentum among investment grade issuers, AngloAmerican, a major mining company, received an unsolicited combination proposal from BHP for an all-share deal worth £31 billion, which would be the largest in the sector...