Stop pandering to Pittsburgh: Politicians should drop opposition to Nippon Steel
Nippon Steel’s bid to purchase U.S. Steel is the best available option to ensure the long-term stability of the American steel industry, and to keep quality jobs — both white- and blue-collar — in Western Pennsylvania. The interventions of federal elected officials, including President Joe Biden and former President Donald Trump, appear calculated to boost their reputations as defenders of American manufacturing and workers, but the effect of their grandstanding will be to harm both.
Nobody likes the idea of United States Steel, once the biggest company in the world and the foundation of America’s and Pittsburgh’s prosperity, in the hands of a foreign conglomerate — and politicians are capitalizing on this discomfort. But the world has changed, and for both American economic security and Pittsburgh’s future, there is no better option on the table than Nippon.
The deal will ensure not only that U.S. Steel’s headquarters will remain in Pittsburgh but, after Tuesday’s announcement, that Nippon’s American HQ, currently in Houston, will move here. It is also the option most likely to result in further investment, including environmental upgrades, in the Mon Valley Works, which is still one of the most extensive integrated steel operations in the world.
At the same time, the legitimate concerns of the United Steelworkers union should be respected. The secrecy with which management struck the original deal damaged labor’s trust, and got the relationship with Nippon off to a bad start.
That points to one area where concerned lawmakers have it right: Nippon should formalize its promises to maintain all existing labor agreements in a binding legal commitment. U.S. Steel violated the spirit if not the letter of its contract with its workers by striking the Nippon deal in secret. Now, Nippon has a responsibility to mend fences and do right by Pennsylvania workers.
Political pandering
From the moment the Nippon acquisition was announced, politicians lined up to denounce it. “It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company,” said Sen. John Fetterman. “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.” Sen. Bob Casey and Reps. Chris Deluzio and Summer Lee have echoed this sentiment.
Across the aisle, Ohio Sen. J.D. Vance said on the day of the announcement that “a critical piece of America’s defense industrial base was auctioned off to foreigners for cash,” and vowed that he would “oppose [the deal] in the months ahead.” And the Republican candidate for president, Donald Trump, has promised to block the acquisition if he’s elected this November.
All of this is nonsense. Promises to dash the deal, whether from Mr. Fetterman or Mr. Vance or Mr. Trump, are promises to hurt Western Pennsylvania’s economy and workers. As the Post-Gazette Editorial Board explained just days after the acquisition was announced: There is no better suitor for U.S. Steel than Nippon, and no better nation to which to entrust American industry than Japan.
The realistic alternative
In all cases, it’s important to consider not just the merits of one particular course, but those of the realistic alternatives. Ideally, U.S. Steel would remain a vibrant, independent, Pittsburgh-loyal, American-owned company.
But that was not realistic. U.S. Steel had already reneged on a promise to invest $1 billion in environmental and efficiency upgrades to the Mon Valley Works. This was ostensibly due to permitting friction with Allegheny County, but it was also clear the company had shifted its focus to its Arkansas “minimills.” Under current ownership, U.S. Steel was stagnant and the Mon Valley Works appeared vestigial.
The only other public bid, which the company rebuffed, came from Ohio-based Cleveland-Cliffs. Besides being only half of Nippon’s nearly $15 billion offer, the deal would have resulted in multiple redundancies — a Cleveland corporate HQ and other integrated steel operations — that would likely have ended with Pittsburgh losing thousands of both office and mill jobs.
Further, the acquisition would have had worse national economic security (and anti-trust) implications than Nippon’s bid: It would have brought nearly all U.S. iron ore deposits under one corporate umbrella.
Nippon, on the other hand, brings deep pockets, a more diverse industrial portfolio and a better-than-most environmental record. While it may be optimistic to expect immediate investment in the Mon Valley Works — especially if political grandstanding delays the deal — it is simply a fact that Nippon is more likely to maintain and expand Pittsburgh operations than U.S. Steel or ClevelandCliffs.
Better for this region
Last week, Mr. Biden broke nearly three months of silence on the Nippon deal by saying that “it is vital for [U.S. Steel] to remain an American steel company that is domestically owned and operated.” Besides signaling his personal skepticism, the statement is likely to influence the work of the Committee on Foreign Investment in the United States, to which the deal has been referred. CFIUS is ostensibly independent, but is an executive branch committee generally responsive to the priorities of the president.
As with the senators’ grandstanding, this is political pandering at the expense of actual economic empowerment for Western Pennsylvania. Alarmist nonsense about “foreign ownership” stirs up fear and anger without helping anybody. It’s pandering at the expense of prosperity.
A strong Nippon Steel is better for this region than a weak U.S. Steel.