Union says it’s bad for workers. Feds say it’s bad for national security.
United Steelworkers Union (USW) leader David McCall released a video earlier this month voicing sharp criticism of the proposed $15 billion acquisition of U.S. Steel by Nippon Steel. Announced one year ago, the deal faces not only opposition from labor but from federal officials, too. The Committee on Foreign Investment in the United States sees it as a security risk, and both President Biden and President-elect Trump oppose it. Despite its proud name, U.S. Steel has not been the nation’s largest producer of steel in years.
While it may be good for shareholders, the USW does not think the sale will help the company or its frontline workers. “U.S. Steel and Nippon have spent millions of dollars on efforts to convince you and public officials that the potential sale is good for workers and the communities. We disagree, and our letter explains the reasons why,” USW’s McCall said. The organization’s Dec. 2 letter claims the deal is designed to benefit shareholders and executives but not the vast majority of U.S. Steel’s 21,000 employees.
The union claims shortcomings by U.S. Steel leadership have forced the need for a sale to Nippon in order for the Pittsburgh-based company to survive and that the Japanese company has failed to give the union any assurances about its planned investments in existing operations.
The deal has also received scrutiny from the federal government. President Biden is reportedly poised to block the purchase and CFIUS sent a letter to the two companies, later obtained by Reuters, citing a concern that the acquisition would create national security risks because it could reduce the national steel supply.
Under a 2022 labor agreement between USW and U.S. Steel, the company promised to make $1 billion in capital investments. That agreement would not be binding on Nippon Steel, though the company did announce plans to invest at least $1.4 billion in capital investments through 2026. However, the union said the company later clarified that the $1.4 billion would only be used for sustaining repair and maintenance expenditures, not capital investments in growth.
After receiving the CFIUS letter, Nippon announced plans to invest another $1.3 billion, though that was not offered as a commitment to the union, according to the organization. USW acknowledged the benefits of Nippon’s offer to make capital investments but noted the plan’s limited scope and uncertain impact on downstream operations and other assets.
Amid USW’s publicized push against the deal, Nippon Steel announced a plan that would give all U.S. Steel non-union employees a $5,000 bonus upon closure of the deal. The company said it has also offered the same promise, which would cost about $100 million to implement, to applicable union representatives for consideration among USW employees. Takahiro Mori, Nippon’s representative director and vice chairman, said these offers demonstrate that the company is listening to the union and government officials that – while shareholders win – rank-and-file employees rarely benefit from big mergers.
The two companies are motivated to make this merger a reality. U.S. Steel would benefit from the investment, and Nippon would be in a better position to compete with China, the world’s runaway leader in steel production. China state-owned steelmaker, Baowu Group, was the world’s largest crude steel producer in 2022, manufacturing 132 million metric tons of crude steel. The world’s third largest producer, China state-owned Ansteel Group, produced nearly 56 million tons in 2022. That’s a combined 188 million tons, compared to Nippon’s 44 million, U.S. Steel’s 14.5 million tons, and total American steel production of 80 million tons per year. Nucor Corp. is the largest U.S. steelmaker, with 18.5 million tons of raw steel coming out of its plants annually.
