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Biden, Harris and Trump all oppose the sale of US Steel. But that doesn’t mean it’s dead
Suffolk

Biden, Harris and Trump all oppose the sale of US Steel. But that doesn’t mean it’s dead


new York
CNN

President Joe Biden, Vice President Kamala Harris, former President Donald Trump and his running mate JD Vance disagree on many issues. But they all agree on one point: They are against the planned merger of the Japanese steel company Nippon Steel and the legendary American steel manufacturer US Steel.

But that may not be enough to cause the deal to collapse.

This is because US Steel is threatening to close its plants with unionized workers if the unpopular deal is not approved. This move could put pressure on the United Steelworkers union to reach an agreement with the two companies that would pave the way for Nippon to approve the purchase.

“Without the Nippon Steel transaction, U.S. Steel will largely divest from its blast furnace assets, putting thousands of good-paying union jobs at risk and negatively impacting numerous communities in the locations where its facilities are located,” the company said in a statement Wednesday. It said it could also move its headquarters out of Pittsburgh without the deal.

The company said the $2.7 billion Nippon Steel has pledged to invest in its unionized plants outside Pittsburgh and in Gary, Indiana, would support the future of production at those plants.

“These investments are subject to the completion of the transaction with US Steel and receipt of the necessary regulatory approvals,” US Steel said. “A standalone US Steel would not incur the same financial commitments.”

The USW, which has so far been strongly opposed to the deal, had no immediate comment on the USW statement. But political opposition to the deal also gives it bargaining power. Unless the union changes its position and supports the deal, it is unlikely that political opposition to the deal will change.

Harris joined the bipartisan resistance in a Labor Day speech to a group that included members of the USW.

“US Steel is a long-standing American company, and it is vital to our country to maintain strong American steel companies,” Harris said in Pittsburgh on Monday. Last month, Trump said at a rally in Pennsylvania: “I will stop Japan from buying United States Steel. They should not be allowed to do so.”

US Steel's Mon Valley Works in Clairton, Pennsylvania. US Steel has said the future of this and other union-owned plants in the company is at risk if it does not get approval to buy them from Nippon Steel. But so far the United Steelworkers union and most politicians are opposed to the purchase.

Normally, this bipartisan political opposition would destroy a deal’s chances of survival. Such a purchase requires approval from the Justice Department’s antitrust division and the Committee on Foreign Investment in the United States (CFIUS). And CFIUS is far from an independent body—it is made up of members of the president’s Cabinet. Moreover, the Biden administration’s Justice Department has been far more reluctant to grant antitrust approval to proposed mergers, blocking some high-profile deals, such as JetBlue’s proposed purchase of Spirit Airlines.

However, there is reason to believe that the deal could win approval not only from regulators but also from the union, which is currently strongly opposed to it. However, experts who believe this is possible say it could only happen after the election.

The union, for example, is using its current political influence to get the best possible deal with Nippon and US Steel, including even stronger promises to keep US Steel plants that employ union members open and financial protection for anyone who loses their job, says Philip Gibbs, a steel analyst at KeyBanc.

“This could be the best possible deal for U.S. Steel,” Gibbs said. “If a change in ownership is perhaps inevitable, if all roads lead to turnover, then why not try to maximize the safety nets in writing? They want to make sure their families are taken care of.”

The proposed purchase would be unpopular. US Steel was once a symbol of American industrial might. It was the most valuable company in the world and the first to be worth a billion dollars shortly after its founding in 1901. It was also vital to the US economy and the cars, appliances, bridges and skyscrapers that gave tangible evidence of that strength. Decades of decline later, it is no longer even the largest US steel producer and is a relatively small employer.

Politicians who like to talk about America’s greatness still don’t want to see the company fall into foreign hands.

In the crucial, battleground state of Pennsylvania, relatively few steelworkers still work for the company. US Steel says it still employs more than 3,000 people at its remaining steel mills on the Monongahela River outside Pittsburgh. But the company still has tens of thousands of retirees in the state and many more voters whose parents, grandparents or even great-grandparents may have worked at its plants. That makes the idea of ​​Japan buying the once-powerful US company a politically sensitive move, Gibbs says.

“It’s not just about the perception of the steelworkers, but also the perception of the state itself,” Gibbs said. “As a politician, you have to say that you will not stand idly by while the deal goes through.”

But both Nippon Steel and US Steel are sticking with the deal, arguing that it is in the best interests of shareholders, US Steel employees and customers.

“US Steel will be a much stronger company as a result of the transaction with Nippon Steel and the American steel industry will be more globally competitive,” US Steel said in a statement. “Nippon Steel has committed to investing nearly $3 billion in our union-owned facilities. These investments would be truly transformative, would secure jobs for generations of steelmakers in Western Pennsylvania and would represent an influx of capital that US Steel simply would not pursue without the transaction with Nippon.”

Both US Steel and Nippon argue that the deal will make US Steel’s steel mills, which employ USW members, far more globally competitive in a steel industry now dominated by foreign producers such as those in China. Nippon said in a statement that it still believes it can approve the deal.

“We believe that a fair and objective regulatory review process will support this outcome and we look forward to completing the transaction as soon as possible,” it said.

To appease its U.S. critics, Nippon Steel issued a statement on Wednesday pledging that U.S. Steel’s board of directors would continue to be comprised primarily of American citizens and that Americans would also make up the majority of the company’s executives. It also said that U.S. Steel would not relocate production capacity or jobs outside the United States.

The union is concerned that Nippon is more interested in US Steel’s non-union plants, which make steel by melting scrap in electric furnaces, than in its unionized plants, the so-called integrated steel mills, which still produce steel from their raw materials such as iron ore.

“Nippon has demonstrated through its own actions that it is changing the way it does business in Japan,” Gibbs said of the country’s switch from integrated steel mills to electric furnaces.

The union said it did not believe Nippon Steel’s previous promises and remained opposed to the purchase.

“Nippon has still not provided any real guarantees that our jobs, wages or benefits will be protected beyond the expiration of our current agreements in 2026,” the union said in a statement last month. A question from CNN about whether it was still talking to Nippon and US Steel about giving up opposition to the deal was not answered.

If the union drops its opposition, it will be much easier for politicians to pass the bill, Gibbs said, although they would probably prefer to wait until after the election.

CFIUS is tasked with investigating the national security implications of the deal. Many politicians who have opposed the deal claim it would jeopardize the country’s long-term economic health. Several experts argue that this claim does not stand up to scrutiny.

“Given the U.S.-Japan alliance, Nippon Steel’s past record and the existing weaknesses of the U.S. steel industry, it is difficult, if not impossible, to identify a national security risk that would justify opposing the merger,” said Michael Leiter, head of Skadden’s CFIUS and National Security Practices. “However, it is much, much easier to identify a political risk, and unfortunately that calculus dominates the issue.”

– CNN’s Matt Egan contributed to this report

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