President Biden will block the merger of US Steel (X) and Nippon based on alleged national security risks. It’s really the opposite.
 

Image courtesy of the Pittsburgh Post-Gazette

US Steel Drops as Biden Set to Block Nippon Steel Deal

On December 10, Bloomberg reported US Steel Drops as Biden Set to Block Nippon Steel Deal
 

President Joe Biden plans to formally block the $14.1 billion sale of United States Steel Corp. to Nippon Steel Corp. on national security grounds once the deal is referred back to him later this month, people familiar with the matter said.

The Committee on Foreign Investment in the United States [CFIUS] panel, which has been reviewing the proposed takeover for much of this year, must refer its decision to Biden by Dec. 22 or 23, said the people, who asked to not to be identified discussing a confidential process.

Biden — born in US Steel’s home state of Pennsylvania — has long signaled opposition to the sale, and has said the company would remain domestically owned. At the same time, he has stopped short of a pledge to kill the deal, while President-Elect Donald Trump has promised repeatedly to block it.

“The President’s position since the beginning is that it is vital for US Steel to be domestically owned and operated,” White House spokesperson Saloni Sharma said. “The CFIUS process was and remains ongoing.”

[In response to the blocked deal] Shares of US Steel tumbled as much as 22% and closed 9.7% lower at $35.26. “This transaction should be approved on its merits,” company spokeswoman Amanda Malkowski said.

“It is inappropriate that politics continue to outweigh true national security interests — especially with the indispensable alliance between the U.S. and Japan as the important foundation,” Nippon Steel said in a statement. 

The powerful United Steelworkers union has also opposed the deal. Vice President Kamala Harris echoed Biden’s stance during her campaign as the Democratic nominee in the presidential election.

It’s unusual for CFIUS to reject acquisitions by entities based in a friendly nation such as Japan.

No National Security Risk
 

The Pentagon, US Treasury and state department have all concluded that Nippon Steel’s $15bn acquisition of US Steel poses no national security risks, even though President Joe Biden is expected to block the deal. The conclusions come despite Biden’s insistence that the purchase of the Pittsburgh-based steelmaker poses economic and national security risks.

Several senior officials have told the Financial Times that the deal presents no national security risks and that Biden’s opposition was political. “There is no credible analysis in the inter-agency that supports Biden,” said one former US official familiar with the internal debate.

The above from the Financial Times.

Trump Again Vows to Block Takeover of US Steel

CNN reports Trump Again Vows to Block Takeover of US Steel
 

President-elect Donald Trump has again indicated that he intends to block a Japanese firm’s $15 billion takeover bid of US Steel upon taking office, saying the former American giant can eventually stand on its own.

“Through a series of Tax Incentives and Tariffs, we will make U.S. Steel Strong and Great Again,” he said on his Truth Social platform on Monday. “As President, I will block this deal from happening. Buyer Beware!!”

US Steel said in September it would be forced to lay off workers and shutter mills without Nippon’s backing. It had put itself up for sale last year after receiving an unsolicited $7 billion takeover offer from Ohio-based Cleveland Cliffs. The $14.9 billion offer from Nippon Steel resulted from that sale process.

The US Steel-Nippon merger would reduce, not increase national security risks.
 

The Hidden Politics Behind the Nippon-US Steel Deal

The Beacon discusses the Hidden Politics Behind the Nippon-US Steel Deal
 

If the buyer were Chinese, preventing the deal on national security grounds might have more merit since the two countries are rivals engaged in various disputes. However, since its defeat in WWII, Japan has been a US vassal, with only a small self-defense force, in part due to constitutional renunciation of war.

In the past, Japan has been allowed to buy assets with far greater strategic significance. For example, Toshiba purchased Westinghouse Electric, a leading provider of nuclear fuel and services to utilities globally, in 2006, when the nuclear power market was taking off. In that deal, CFIUS granted regulatory approval less than four months after the sale agreement was signed.

Competition is another possible issue. Last year, steelmaker Cleveland Cliffs offered $8.3 billion for USS. The union supported that bid, but the company rejected it. Automakers wrote to Congress, complaining that the combined company would control 65-90% of automotive steel. This is not the case with the Nippon bid.

Lost in this discussion is the reason for the deal: to help arrest USS’s decline and stave off possible plant closings and bankruptcy. Steel prices have steadily declined since COVID-19 closures and supply chain disruptions. Given the cooling Chinese economy, particularly the construction sector, this trend looks set to continue.

Thus, if the acquisition makes economic sense, has been approved by shareholders and management, and poses no competitive or national security risk, why would the Bidden/Harris White House block it? 

However, blocking the deal can backfire: If the deal falls apart, USS could be forced to close steel mills and fire workers. (Predictably, this is precisely what USS management threatened after rumors of political roadblocks to the deal surfaced. Just as predictably, Cleveland Cliffs offered to buy those facilities, maybe at the much lower price it offered.) This would devastate the local economy and could sour voters on politicians who lobbied for it. 

Politics in Play

That article was written in September. It asked “Why would the Bidden/Harris White House block it?”

Biden-Harris would block it for the same reason trump will. Both are liars trying to appeal to union leaders, the country be damned.

U.S. Steel Workers Rally for Nippon Steel

The Pittsburg Post-Gazette reports U.S. Steel Workers Rally for Nippon Steel
 

Hundreds of steelworkers braved freezing temperatures to rally Thursday afternoon for the imperiled $15 billion takeover of U.S. Steel by Nippon Steel as President Joe Biden and President-elect Donald Trump continue to oppose the sale.

Speakers described the Japanese investment as crucial to the future of Mon Valley Works facilities and urged federal officials and United Steelworkers President David McCall to visit the plants and speak with impacted workers.

“Without this deal with Nippon Steel, we will be the last generation to work here at this historic steel plant,” said Brian Pavlack, a third-generation steelworker and member of the USW local in Clairton.

“I also want to call out Senator [John] Fetterman for not backing the sale. You go on national television and you say you’re with the steelworkers and live across the street from the [Edgar Thomson] plant. I’m telling you now, Mr. Fetterman, 90% or more of the steelworkers are for the sale.”

In a statement, U.S. Steel CEO David Burritt — who was not at the rally — described Nippon’s acquisition as “the only scenario where significant investments would occur across the unionized, integrated facilities, including in Mon Valley Works.”

“We need to get the deal done,” he said.

Local mayors and other elected officials talked about the transformative potential of Nippon’s planned $2.7 billion investment and expressed anxiety about a potential presidential block.

“Time is running out,” Clairton mayor Richard Littanzi said. “Speak to your family, your friends, relatives, co-workers, and say, ‘Hey, listen, we have got to get this deal done. If not, the Mon Valley is dead.’”

Nippon Steel Bid Agreement

• Nippon would invest $2.7 billion in union-represented local steel facilities. This would allow the US to better compete against China.
• The merger would give American manufacturers access to high-quality, domestically produced steel.
• The merger would strengthen ties with key allies
• The merger would increase US competition within the US, while keeping production here.
• As a result of the above, the merger would produce stronger, cleaner, more advanced steel here at home for the benefit of American consumers and at a cheaper price due to investments.

Merger Would Lower National Security Risks

Cleveland Cliffs merger would have control 100% of blast furnace production in the U.S. and 65% to 90% of domestic steel used in vehicles.

That’s the real security threat.

U.S. Steel workers support the Nippon merger, so does Gary Indiana, and so does anyone with an ounce of common sense including UAW workers who fear higher prices for cars.

The US already has the among the highest prices for steel in the world. The last thing the US needs is higher prices for cars that are already hugely unaffordable.

The investment by Nippon into more advanced processes would lower prices and increase competition.

Gut Punch

The TribLive reports ‘Gut punch’: Trump upsets local union leaders by opposing U.S. Steel-Nippon deal
 

On Monday night, President-­elect Donald Trump reiterated his opposition to the proposed $14.9 billion sale of U.S. Steel to Japan’s Nippon Steel Co., vowing to block the deal when he takes office.

Some steelworkers in Pittsburgh’s Mon Valley who support the deal — and Trump — weren’t happy.

“I am very frustrated with the news that came out last night,” United Steelworkers Local 2227 Vice President Jason Zugai said during a panel discussion Tuesday in Washington, D.C. “I didn’t expect that to come out. So that was like a gut punch.”

Also standing in opposition is the leadership of the United Steelworkers. Its president, David McCall, told TribLive last month that despite fractures among his membership, he remains firmly against any deal.

Maskil told the panel convened by the Hudson Institute, a Washington, D.C., think tank, that 95% of the employees at the Irvin Works now support the Nippon purchase. He suspects that a majority of workers across all three Mon Valley facilities back the deal.

What to Expect

Currently, Trump and Biden both say they are against the deal despite the wishes of U.S. steel workers, the UAW, and common sense.

It’s a case of politics over genuine US interests.

The best we can hope for is Trump changes his mind, renegotiates some minor aspect of the deal, approves it, and then brags about the art of the deal.

Watching the hypocrites will be interesting if Trump reverses after negotiating some trivial change. Otherwise, expect higher prices and a loss of jobs.

It’s very rare that I side with unions, but this case is clear.

An Unfond Farewell to Federal Trade Commission Chair Lina Khan

In case you missed it, please see An Unfond Farewell to Federal Trade Commission Chair Lina Khan
 

Khan’s latest assault on business is reviving a 1936 antitrust theory. Getting rid of Khan will be a good thing because no one could possibly be worse.

Unfortunately, we will be saddled with a horrendous pick as Labor Secretary instead of the FTC.

I discussed this sorry state of affairs on November 25 in Trump’s Nauseating Pick for Labor Secretary Is the Teacher’s Union Favorite
 

Hard to believe, but Donald Trump nominated a favorite of teachers union chief Randi Weingarten as his Labor Secretary. Why would Mr. Trump want to empower labor bosses who oppose his economic agenda and spent masses to defeat him?

Meanwhile, the big question is how much more damage the Khan and the Biden administration will do before they are both gone.

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