(NewsNation) —Shareholders for Pittsburgh-based U.S. Steel are slated to meet Friday to vote on a controversial $14.1 billion acquisition and takeover by Japanese-owned manufacturing giant Nippon Steel.
The deal was announced last December by the companies that will be among the top three steel-producing operations in the world once they combine, according to the Associated Press, which cited 2022 figures from the World Steel Association.
But the Japanese acquisition has gotten a testy response from both labor unions and President Joe Biden who oppose the deal saying it will not bode well for unionized labor or domestic supply chains and that it could pose national security implications.
Japanese Prime Minister Fumio Kishida made a formal state visit to the White House Wednesday. While the White House said the deal is not part of the agenda between the two leaders, both addressed it when asked by reporters, NPR reported.
“I stand by my commitment to American workers. I’m a man of my word, I’m going to keep it,” Biden said, adding that he also stands by his commitments to the U.S. alliance with Japan.
Kishida said that he hopes the discussions about the deal unfold positively for both sides, and that he felt the U.S. government was following appropriate protocols regarding the acquisition, the outlet reported.
“Japan is the largest investor to the U.S.,” he told reporters. “Japanese businesses employ close to 1 million workers in the United States, and investment from Japan to the U.S. can only increase upward in the months and years to come.”
What does the acquisition mean for US steelworkers?
When the takeover was announced, Nippon packaged the deal as a positive for the more than 22,000 U.S. Steel employees.
“Our transaction delivers clear benefits to U.S. Steel, union workers, the broader American steel industry, and American national security,” the Japanese company said in a statement.
“Through increased financial investment and the contribution of our advanced technologies to U.S. Steel, Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers in the critical industries that rely on American steel while strengthening American supply chains and economic defenses against China,” it added.
But United Steelworkers (USW) International President David McCall slammed the deal in December as “greedy” and “shortsighted” and pledged to “exercise the full measure of our agreements to ensure that whatever happens next with U.S. Steel, we protect the good, family-sustaining jobs we bargained.”
McCall said Nippon might not have the capacity to live up to the union’s existing contract.
“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.
The union said it received a letter along with a draft agreement from Nippon Steel on March 27 and that while the company made several commitments, including not laying off employees through Sept. 1, 2026, the letter “does not provide a meaningful basis for a resolution of the ongoing dispute.”
A week before Nippon’s March letter to USW, Biden announced he also opposed the planned sale.
“I told our steel workers I have their backs, and I meant it. U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.”
What does the merger mean for the American steel industry?
The acquisition will add 20 million metric tons of crude steel capacity to its 66 million tons, Reuters reported.
That means Nippon Steel will be a bigger supplier to the U.S. auto industry, which is producing more in the wake of recent labor union deals with major manufacturers.
“We are excited that this transaction brings together two companies with world-leading technologies and manufacturing capabilities,” NSC President Eiji Hashimoto said in an official statement.
While opposition mounts against the merger, some experts have said it could result in higher productivity in the U.S. steel industry.
“As the prices of U.S. steel fall, the incentive to import steel will decline, and American manufacturers of goods like refrigerators and automobiles will be able to reduce costs, thereby becoming more competitive. All of this will strengthen America’s manufacturing sector and technological base, and ensure the continued provision – and possible creation – of ‘good jobs’ in the US,” wrote Anne O. Krueger, a professor of International Economics at the Johns Hopkins University School of Advanced International Studies in opinion editorial outlet Project Syndicate.
But USW is concerned that the tide could go in the other direction and that, eventually, integrated steel mills will be closed in favor of imports from Japan.
How will the acquisition affect other US industries?
Other industries, including the auto sector, are keeping a close eye on the Nippon deal which could have larger implications.
The Alliance for Automotive Innovation, a trade group representing auto manufacturers, appealed to Biden’s chief economic officer last month, calling for measures to prevent Oho-based steel manufacturers Cleveland-Cliffs from acquiring U.S. Steel if the Nippon deal collapses, reported Yahoo Finance.
Automakers are worried that if Cleveland-Cliffs enters the equation, there could be a monopoly over automotive steel, which could lead to less market competition and a potential decrease in automakers’ leverage for price negotiations for steel, the outlet reported
U.S. Steel had increased production for electric vehicle components, so the potential that Cleveland-Cliffs could swoop in and dominate steel used in car manufacturing poses an antitrust concern, according to the outlet.
The acquisition is under investigation, why?
The Justice Department opened up an extended in-depth antitrust investigation of Nippon Steel’s takeover following a preliminary antitrust review, Politico reported Wednesday, citing two people with direct knowledge of the matter.
It’s unclear what prompted further investigation, but the original inquiry focused on a large manufacturing plant in Calvert, Alabama, jointly owned by Nippon Steel and Luxembourg-based ArcelorMittal, the outlet reported.
That plant competes directly with U.S. Steel, particularly for automotive customers and the DOJ had been confidentially talking with industry participants to ask how the joint venture would compete with a combined Nippon Steel and U.S. Steel, Politico reported.
The Committee on Foreign Investment in the U.S., an interagency panel under the Treasury Department, is also looking into the Nippon acquisition, according to the outlet.
The committee evaluates mergers and other investments by non-U.S. interests and primarily focuses on countries like China and Saudi Arabia, but U.S. Steel’s importance to the American industrial base has led to concerns about it being foreign-owned, the outlet reported.
NewsNation’s Katie Smith contributed to this report.
