WASHINGTON — By blocking a Japanese company’s takeover of U.S. Steel, President Joe Biden stated he was safeguarding jobs in the heart of America. However, this decision may inadvertently jeopardize those very jobs.
Nippon Steel’s nearly $15 billion bid for the historic Pittsburgh-based steelmaker included a commitment to invest $2.7 billion in upgrading U.S. Steel’s blast furnace operations in Gary, Indiana, and Pennsylvania’s Mon Valley. The Japanese firm also pledged not to cut production capacity in the U.S. for the next decade without prior approval from the government.
According to Jason Zugai, an operating technician and vice president of the United Steelworkers union local, “They were going to invest in the Valley. They committed to 10 years of no layoffs. We won’t have those commitments from anybody now.” This sentiment was echoed by other Mon Valley steelworkers who supported the Nippon deal despite pressure from the union’s national leadership to oppose it.
The fallout from cancelling the Nippon-U.S. Steel deal could spell disaster for Pennsylvania, said Gordon Johnson, a stock analyst who closely follows U.S. Steel. “I can’t grasp how this serves the interests of workers or shareholders of U.S. Steel.”
On Friday, Biden announced the blockage of the Nippon takeover, citing the necessity of a strong U.S.-owned steel industry for national security. He asserted, “Without domestic steel production and domestic steel workers, our nation is less strong and less secure.” Following the announcement, U.S. Steel’s stock saw a decline of 6.5%.
This decision marks a notable shift away from free trade and open investment, highlighting a growing bipartisan consensus. Previously, President-elect Donald Trump also expressed opposition to the Nippon takeover, promising to block the deal if elected.
Both Nippon and U.S. Steel have decried Biden’s decision as a violation of due process and are considering legal action to attempt to salvage their agreement. “We are left with no choice but to take all appropriate action to protect our legal rights,” they stated.
Established in 1901 through a merger that created the world’s largest company, U.S. Steel has seen a decline in workforce numbers from 340,000 during World War II to fewer than 22,000 today due to international competition.
Efforts by the U.S. government to protect domestic steelmakers through tariffs have created financial opportunities for companies like U.S. Steel. Despite having $1.8 billion in cash, a figure down from $2.9 billion earlier this year, U.S. Steel claims it requires Nippon Steel’s investment to modernize its facilities.
“Without the Nippon Steel transaction, U.S. Steel will largely pivot away from its blast furnace facilities, putting thousands of well-paying union jobs at risk,” warned the company.
Looking ahead, U.S. Steel is shifting focus toward electric arc furnaces, which are more efficient in producing high-quality steel. Analysts suggest that the company sees greater investment potential in this area as no new blast furnaces have been constructed in North America for decades.
Another potential bidder for U.S. Steel could emerge, as arch-rival Cleveland-Cliffs previously offered $7 billion for the company before Nippon Steel’s larger all-cash bid was accepted.
Pennsylvania Governor Josh Shapiro cautioned U.S. Steel management against risking local jobs and emphasized that future bidders must offer similar commitments to investment and job protection that Nippon Steel proposed.
