January 5th 2025.
In a recent decision, President Joe Biden has blocked a Japanese company's bid to take over U.S. Steel, citing the protection of American jobs as his primary concern. However, some are now questioning whether this move may actually put those jobs at risk.
The Japanese company, Nippon Steel, had promised to invest $2.7 billion into U.S. Steel's aging blast furnace operations in Gary, Indiana and Pennsylvania's Mon Valley. They also made a commitment to refrain from reducing production capacity in the United States for the next ten years without first obtaining approval from the U.S. government. This deal had garnered support from some Mon Valley steelworkers, including Jason Zugai, an operating technician and vice president of the United Steelworkers union local at a U.S. Steel plant in the Mon Valley.
However, the union's national leadership exerted pressure on the Biden administration to reject the deal, causing it to ultimately fall through. This decision has been met with criticism, with some, like Gordon Johnson, who follows U.S. Steel stock on Wall Street, stating that it will be a "disaster for Pennsylvania" and questioning the interests of both workers and shareholders.
President Biden cited national security concerns as the reason for halting the takeover, stating that a strong domestically owned and operated steel industry is crucial for the strength and security of the nation. However, this decision has caused U.S. Steel's stock to drop by 6.5%.
This move by President Biden reflects a growing trend towards protectionism and away from free trade and open investment, which has gained bipartisan support. Even President-elect Donald Trump had previously expressed his opposition to the Nippon takeover.
In response to the decision, Nippon and U.S. Steel released a joint statement calling it a violation of due process and the law, and stating their intention to take legal action in order to save the deal. U.S. Steel, which was founded in 1901 and was once the largest company in the world, has seen its position erode over the years due to foreign competition, particularly from Japan and China.
The U.S. government has attempted to protect American steelmakers by imposing tariffs on imported steel, a policy that has been continued by both Trump and Biden. However, these trade barriers have also artificially inflated the price of American steel, providing a financial boost for companies like U.S. Steel.
Despite being profitable and sitting on $1.8 billion in cash, U.S. Steel has stated that it needs the investment from Nippon Steel in order to continue investing in its blast furnaces, such as the ones in Pennsylvania and Indiana. Without this deal, the company has warned that it may have to pivot away from these facilities, potentially putting thousands of union jobs at risk and negatively impacting the communities where its plants are located.
Some analysts speculate that another company, such as Cleveland-Cliffs, may step in and make a bid for U.S. Steel, as they had previously attempted to do in 2023. Pennsylvania Governor Josh Shapiro has warned U.S. Steel against jeopardizing the jobs of their employees and their families, and has called for any future potential buyers to make the same commitments to capital investment and job protection that Nippon Steel had offered.
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