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Administration Wants to Have Steel Cake and Eat It Too

“The Japanese have a saying, ‘Fix the problem, not the blame.’” — “Rising Sun” (1993)

The Biden administration recently announced tariffs on Chinese steel imports — which are fine when he throws them around but xenophobic! when Donald Trump uses them. This is another instance where Biden shows he wants to have his cake and eat it too when pandering to Rust Belters, much like his resistance to the U.S. Steel/Nippon Steel deal.

Pennsylvania-based U.S. Steel has been entertaining bids for its business. A year ago, Ohio-based Cleveland-Cliffs offered $7.3 billion to buy the company. This offer that was quickly outmatched when Tokyo-based Nippon Steel offered $14.1 billion. U.S. Steel CEO David Burritt recently said this latter deal will likely go through this year.

Nippon Steel’s annual production is 44.37 million tons, while U.S. Steel’s is 14.49 million tons, according to data from the World Steel Association. If the two combined, like some kind of Japanese super-robot, they would become the third-largest steel producer in the world.

Now, Cleveland-Cliffs would prefer to acquire its domestic rival rather than see it plucked up by an international one. However, rather than pony up $7 billion more to outspend Nippon, it uses the much-cheaper alternative of election-year fearmongering to scare U.S. Steel into settling.

As well they might. Cleveland-Cliffs’s stock has been in a freefall, down 30 percent.

A downgrade of the stock’s value has been attributed to broader economic conditions, but analysts at Barrons also attribute this to operational missteps by CEO Lourenco Goncalves. The Zacks Ranks system put it as a rank 4/5 (sell).

Increasingly, the narrative is changing: U.S. Steel doesn’t need Cleveland-Cliffs to survive as much as Cleveland-Cliffs needs U.S. Steel. Opponents of the Nippon deal don’t want that narrative to change, imagining a 1950s-style Renaissance of domestic manufacturing if the Japanese investment deal can just be somehow stopped! This is a classic example of the fallacy of the false alternative. The truth is that no such Renaissance will happen.

Americans — and probably almost everyone else — attach a patriotic importance to manufacturing.

Opponents of the Nippon Steel deal are employing this kind of strategy now. Muscle-bound manufacturers at Bethlehem Steel played a slightly more pivotal role in winning World War II than the nerdy accountants at Ernst & Young.

Spoiler alert: WWII ended 80 years ago. And now, Japan is our No. 4 biggest trading partner. The Americans and the Japanese have been fast friends for decades.

If our domestic steel industry isn’t undergirded with this kind of capitalization, the much more significant threat is an oversupply of Chinese steel that cedes to the Communist Party there (yet) another advantage.

If the Nippon-U.S. Steel merger doesn’t go through, the most likely outcome is U.S. Steel breaking up into parts. Cleveland Cliffs will have to divest because of antitrust-happy Federal Trade Commission Chair Lina Khan’s “big is bad” attitude toward American corporations. While Nippon Steel has promised to maintain the status quo on domestic operations — except for moving the headquarters from Houston to Pittsburgh — the uncertainty of any other outcome is questionable for employees’ short-term job prospects and long-term retirement.

If a piece of U.S. Steel ends up in the hands of rivals from China or elsewhere, pensions won’t be as secure as they would be if the company stays whole. And it won’t influence the presidential election either way.

Businesses in swing states frequently get a lot of attention during presidential elections, with candidates competing to win independent voters with their economic message. Trump won Pennsylvania in 2016, lost it to Biden in 2020, and now enjoys a narrow lead there. Both have publicly stated they oppose the Nippon Steel acquisition.

The Nippon Steel-U.S. Steel merger would fix heavy problems in our domestic manufacturing industry. Election-year shenanigans from a struggling competitor shouldn’t be allowed to fix the blame.

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GALLAGHER: Main Street Depends on Steel Jobs

Amidst the challenges facing Pennsylvania’s Main Street businesses, the looming threat of job losses casts a shadow of uncertainty. As the state grapples with the future of its steel industry, the choice between preserving local jobs or succumbing to further consolidation grows ever more critical. In this pivotal moment, the entrance of Nippon Steel potentially represents a beacon of hope for Pennsylvania’s workforce.

With a commitment to preserving US Steel’s identity and honoring agreements with workers, Nippon is making a serious effort to assuage job loss concerns by committing to keeping jobs in Pennsylvania and prioritizing the well-being of local communities. According to a press release, U.S. Steel will “retain its iconic name and headquarters in Pittsburgh” if bought by Nipon Steel Company (NSC) rather than Cleveland Cliffs.

NSC said it would honor agreements with the U.S. Steelworkers Union: “All of U. S. Steel’s commitments with its employees, including all collective bargaining agreements in place with its unions, will be honored and NSC is committed to maintaining these relationships uninterrupted.”

It is not only the steel industry workers who benefit from keeping jobs in the state, family businesses of all shapes and sizes depend on steel workers as a customer base and benefit tremendously from the steel industry’s economic footprint.

The job picture in Cleveland is less clear. An article last year in Cleveland Magazine cited sources that said the Cleveland company was preparing to ship a significant number of jobs from Pittsburgh to Cleveland. The article claims: “a major tenant is gobbling up more office space. The tenant, Cleveland-Cliffs Inc., is adding hundreds of office workers to the building, a number that could reach 2,000 employees in the next few years if it is able to acquire Pittsburgh-based rival U.S. Steel. If that happens, two sources who are close to Cliffs’ executives say Cliffs will reconsider 200 Public Square as its headquarters of what would become the nation’s largest steelmaker.”

The Cleveland company’s apparent track record of consolidation paints a concerning picture of the potential consequences for Pennsylvania’s Main Street. This pattern of consolidation has left communities reeling, with Main Street businesses bearing the brunt of the fallout. Reports of potential job relocations and consolidations have sparked fear among Pennsylvania residents, who have borne witness to the devastating effects of previous mergers and acquisitions as well as the fallout from past trade deals like NAFTA.

In order to preserve Main Street jobs and preserve the fabric of Pennsylvania’s communities, Pennsylvania lawmakers should oppose any deals that are likely to move jobs out of Pennsylvania. The long-term consequences of further consolidation are clear: more job losses, more economic hardship, and more uncertainty for Pennsylvania’s Main Street. In the face of mounting challenges, Pennsylvania’s policymakers must seize this opportunity to champion the interests of their constituents. The time to act is now, for the sake of Pennsylvania’s workers, families, and communities.

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PA Sen. Fetterman Hopes to Block Japanese Company From Buying U.S. Steel

Sen. John Fetterman (D-Pa.) announced Monday he will try to block the sale of Pittsburgh-based U.S. Steel to Nippon Steel, a Japanese company.

Fetterman cited security concerns and fears that jobs will be lost if the deal goes through.

“I live across the street from U.S. Steel’s Edgar Thompson plant in Braddock. It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company. Steel is always about security – both our national security and the economic security of our steel communities. I am committed to doing anything I can do, using my platform and my position, to block this foreign sale,” Fetterman said.

“This is yet another example of hard-working Americans being blindsided by greedy corporations willing to sell out their communities to serve their shareholders. I stand with the men and women of the Steelworkers and their union way of life. We cannot allow them to be screwed over or left behind. I promise to them and to all forgotten communities across Pennsylvania that I will work with Senator Casey and the rest of the delegation to fight like hell to make this right.”

Fetterman’s fellow Democrat Sen. Bob Casey (D-Pa.) agreed.

“The United States marquee steel company should remain under American ownership,” said Casey. “From initial reports, this deal appears to be a bad deal for Pennsylvania and Pennsylvania workers. I’m concerned for what this means for the steelworkers and the good union jobs that have supported Pennsylvania families for generations, for the long-term investment in the commonwealth, and for American industrial leadership.”

U.S. Steel agreed to a $14.1 billion deal with Nippon, which is offering to buy the steel giant’s shares for $55 each. Although Nippon claims it will honor all collective bargaining agreements and keep the company in Pittsburgh, the union, United Steelworkers International, is crying foul.

Union President David McCall said, “To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long.

“We remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead, it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company.

“Neither U.S. Steel nor Nippon reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions,” McCall said.

“Based on this alone, the USW does not believe that Nippon understands the full breadth of the obligations of all our agreements, and we do not know whether it has the capacity to live up to our existing contract. This includes not just the day-to-day commitments of our labor agreement but also significant obligations to fund pension and retiree insurance benefits that are the most extensive in the domestic steel industry.

He called on government regulators to “carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers.”

The USW represents 850,000 workers.

President and Chief Executive Officer of U. S. Steel, David B. Burritt, told investors the purchase offer is a good deal.

“I couldn’t be happier with the outcome of our strategic review process, because it delivers on what is best for each of our stakeholders. And importantly, this is the best value with certainty and timeliness to close,” Burritt said.

Following the closing of the transaction, U. S. Steel will retain its iconic name, brand, and headquarters in Pittsburgh. NSC is committed to continuity in strong relationships with U. S. Steel’s suppliers, customers, the surrounding communities, and people that support U. S. Steel’s operations and is committed to being a productive member of these communities, the company said in a press release.

In an October press release, the company said, “United States Steel Corporation’s operations in Pennsylvania, which include U. S. Steel’s corporate headquarters in Pittsburgh and sites in Braddock, Clairton, Fairless Hills, Munhall, and West Mifflin, contributed $3.6 billion to the local and state economy in Fiscal Year 2022, according to an economic impact report released today. The report further concludes that the U. S. Steel’s economic activity supported or sustained 11,417 jobs.

“Bob Casey and Joe Biden have weakened America’s national security and economic standing in the world. We need to be a manufacturing country, with Americans working for American companies,” Dave McCormick, the Republican running against Casey, said on social media.

While Biden and Casey have spent most of their lives in Washington working for the government, McCormick has been in the business world as CEO of a Pittsburgh software company and, most recently, the CEO of Bridgewater, a hedge fund, as well as serving having served in the George W. Bush administration.

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