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Nippon Steel is in a standoff with a union that represents some of the most politically influential voters in the United States. | Photo: Bloomberg
When US Steel was up for sale in 2023, Nippon Steel executives in Tokyo saw it as an opportunity: Buying the American steelmaker could help the group offset weak demand in its home country and strengthen its position in a global business dominated by China.
On December 18, the two companies announced that Nippon Steel had agreed to acquire US Steel for $14.9 billion, a 40 percent premium to US Steel’s then-share price. Analysts touted Nippon Steel as a potential savior of US Steel, which had once been the backbone of the American economy and had now fallen behind its competitors.
But almost immediately, the merger sparked a backlash in the United States that prevented its completion.
US politicians from both parties have condemned the prospect of a 123-year-old American industrial company being taken over by a foreign corporation. The timing was particularly bad for Nippon Steel: The United Steelworkers union, which had been the strongest opponent of the deal, is based in Pennsylvania, a state that could determine the winner of the presidential election in November.
Much of the furor surrounding the deal stems from Nippon Steel’s decision not to consult union leaders during negotiations with U.S. Steel, according to interviews with some of the key players, including two U.S. and Japanese officials who have informally advised Nippon Steel. Both spoke on condition of anonymity because they were not authorized to speak publicly.
Nippon Steel also initially underestimated the difficulties the United Steelworkers’ opposition would pose to completing the deal, especially in an election year, the two officials said.
Now, eight months later, Nippon Steel is locked in a standoff with a union that represents some of the most politically influential voters in the U.S. The fate of the deal will most likely be left to the next president and could have implications not only for the structure of the global steel industry but also for U.S.-Japan economic relations. Nippon Steel has hired lobbyists to bolster its arguments that the merger would be beneficial for both companies and their workers, as well as for the U.S. and Japan.
The United Steelworkers union has filed a lawsuit against the takeover based on its collective bargaining agreement. Experts say this is an attempt to obtain concessions for workers.
“You could hardly have predicted how political this deal has become,” said Nick Wall, a mergers and acquisitions lawyer at Tokyo law firm A&O Shearman, who is not involved in the negotiations. The presidential election, he said, “will be won or lost in several key states that happen to be at the center of this deal.”
On the day the merger was announced, said David McCall, international president of the United Steelworkers, he received a call at 6 a.m. from US Steel CEO David Burritt explaining the details of the deal. McCall was stunned.
Months earlier, another company bidding for US Steel, American steelmaker Cleveland-Cliffs, had discussed its plans with union leaders and asked for their support. Now, for the first time, it heard of the involvement of a Japanese buyer.
The union immediately opposed the takeover, believing it to be a violation of an agreement with US Steel in which the union had been assured that it would be informed in advance of any change of control in the company.
©2024 The New York Times News Service
First published: 26 August 2024 | 22:30 IS
