U.S. shouldn’t be afraid of Nippon Steel
The proposed purchase of U.S. Steel by Japan’s Nippon Steel has done something few issues can do in Washington: forge a bipartisan consensus. In this case, members of both parties are absolutely molten about the prospects of a 123-year-old American manufacturer flying a Japanese flag.
Their stated concern is that the takeover represents a national security threat, even though Japan is a closerthan-ever ally and trading partner. Sen. John Fetterman, D-Pa., who lives opposite U.S. Steel’s Edgar Thomson Works — “ET” to locals — in Braddock, Pa., expressed outrage 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.” In a Washington Post op-ed last year, Sen. J.D. Vance, R-Ohio, wrote: “The board of directors of U.S. Steel must reject any bid from a foreign acquirer.”
No, they mustn’t. The unstated concern here is more election threat than national security threat. President Joe Biden needs to hang on to blue-collar voters in Pennsylvania, Ohio and Michigan who traditionally vote Democratic but whose loyalty is far from certain. The transactional Donald Trump, who imported Chinese steel to build a Las Vegas hotel, now says he will block the deal if elected.
Funny, when I lived in Pittsburgh, I can’t remember Republicans riding to the rescue when U.S. Steel was closing six plants across the country. Some 15,000 people were once employed by the company’s vast Homestead Works along the Monongahela River; it shuttered in 1986, undermining an entire community. The steel industry’s implosion — we would ultimately lose Bethlehem Steel, Jones and Laughlin Steel and National Steel — wasn’t deemed a national security issue by the free-trading administration of President Ronald Reagan. Nor was Reagan any friend of organized labor, as he proved when he fired striking air traffic controllers. That sent a message to corporations that union-busting was OK, setting back organized labor for decades.
Which is why the steelworkers’ opposition to the deal seems so counterintuitive. The union, United Steelworkers, is rightly upset that it was excluded from deal talks and has vilified U.S. Steel for doing so, and for breaking promises about reinvesting in existing operations. Yet given the animosity that has existed between the U.S. Steel and its workers for more than 100 years, this might be a case of the devil you know. The steelworkers had reached a favorable agreement with Cleveland-Cliffs, which made a lowball offer for U.S. Steel that was then bettered by Nippon.
The union’s talks with the Japanese firm — which has promised no layoffs or plant closures — have gone nowhere so far, but that’s often the way bargaining works. And the union is good at bargaining. The two sides can still come to an agreement, and very well might.
Yes, U.S. Steel helped America build huge navies and win world wars. But today, the company is a tired, integrated steel producer in need of new capital and new vision. That’s why the board of directors decided to sell the company, hoping someone else could do a better job with the company’s assets. Cleveland-Cliffs first offered $35 a share, but then Nippon Steel blew that away, offering to pay $55 a share. So the U.S. Steel board is (as corporate law requires) taking the higher offer.
Perhaps the most iconic thing about U.S. Steel? The way it was assembled: a 1901 robber-baron collusion that consolidated rival steelmakers, eliminated competition and increased prices and profits.
Pittsburgh, meanwhile, has moved on from steel to embrace growth sectors such as banking, health care, biotech and robotics. The Edgar Thomson plant, built by Carnegie in the 19th century, is still operating along the banks of the Monongahela River. As long as the plant and the jobs there are protected, as Nippon Steel has promised, who owns it doesn’t really matter — unless you’re a politician.