Proposed US Steel sale merits close attention for potential value | Michael Douglas
In December, President Joe Biden described the proposed sale of U.S. Steel to Nippon Steel of Japan as deserving “serious scrutiny.” Now, three months later, he has made plain his opposition. In a recent statement, he cited the “iconic” status of U.S. Steel, arguing that “it is vital for it to remain an American steel company,” in other words, “domestically owned and operated.”
The president has company. Democrats and Republicans in Congress have cudgeled the deal. U.S. Sen. J.D. Vance, a Cincinnati Republican, summed up his view this way: “Today, a crucial piece of America’s defense industrial base was auctioned off to foreigners for cash.”
U.S. Sen. Sherrod Brown has been a leading opponent. The Cleveland Democrat sent a letter to the president stressing the harm facing steelworkers. He argued that U.S. Steel and Nippon Steel have left the United Steelworkers “in the dark.” More, he stressed that the acquisition would jeopardize American challenges to unfair trade practices, such as dumping cheap steel here.
Brown raises worthy concerns. Steelworkers deserve to be heard. The pursuit of unfair practices is indispensable to governing global trade, something Brown has done lately in highlighting the surge of Mexican steel imports.
Yet for all the clarifying opposition, this sale merits close attention for its potential value — for workers, the two companies and domestic steel production.
There’s something familiar about this discussion. U.S. Steel once was the dominant player in the industry, reaching its peak employment in 1940s and its peak production a decade later.
Unfortunately, since the 1950s, the steelmaker has struggled at various turns to keep pace with the competition. It has been slow to invest and adopt more efficient operations. It often has looked to the government for assistance, and officials have provided the requested protection.
At the moment, the company faces another telling juncture, among other things, having let slide a $1.2 billion modernization plan. Might Nippon Steel bring the necessary capital investment, reviving the plan, even preserving jobs in the end?
Nippon Steel sees the sale as a way to gain a substantial presence in the American market, driven, in part, by the big commitment to public works the Biden White House pushed through Congress. The Japanese company has tried to sound reassuring. It says it will honor the union contract. The U.S. Steel name will remain. So will the company headquarters in Pittsburgh.
Janet Yellen, the treasury secretary, has promoted the concept of “friend-shoring,” an effort to bolster trade and investment connections between partners and allies with the goal of enhancing economic and national security. As the Atlantic Council points out, the proposed sale fits neatly into the idea.
Part of the objective goes to countering China strategically. Japan is a trusted ally. It already invests more in the United States than any other country. The Nippon purchase of U.S. Steel seems to flow logically, resulting in the second largest global producer of steel, behind a state-owned Chinese company.
In that way, concerns about the risk to national security deserve further context. The Congressional Research Service pointed out that historically American military needs amount to roughly 3% of annual domestic steel production.
Cleveland-Cliffs had its eye on purchasing U.S. Steel, offering $7 billion, around half the price of the Nippon Steel deal. Better an American buyer? It gets complicated. The Department of Justice may intervene for antitrust reasons, worried the combined company would control an excessive portion of vehicle-grade steel.
American automakers would be unhappy.
So, there are strong arguments for Nippon Steel coming to the rescue of U.S. Steel. After all, this isn’t the 1980s when many Americans feared a Japanese takeover of just about everything that mattered in an economic sense.
Ideally, the concerns identified by Sherrod Brown would get worked out somehow, for instance, Nippon Steel and U.S. Steel credibly engaging the criticisms expressed by the United Steelworkers. Add to the concerns that Nippon Steel and U.S. Steel appear lax in their commitment to a transition from fossil fuels to combat climate change.
As the New York Times recently reported, researchers rate the two companies as high-emitters of greenhouse gases. Nippon Steel and U.S. Steel insist they are committed to a decarbonized operation by 2050. Yet they appear far from a path to get there, still more reliant on coal-fired furnaces.
If anything, environmental analysts fear the two are betting on technologies to capture and store carbon emissions, though such methods are yet to develop, let alone perform at scale.
No doubt, the country must maintain a vibrant manufacturing sector. That includes nurturing and protecting key industries. The goal also merits attention to opportunity in serving the economy and national security. Hard to believe a way cannot be found to make this sale work.
Michael Douglas was the Beacon Journal editorial page editor from 1999 to 2019. He can be reached at mddouglasmm@gmail.com.
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This article originally appeared on Akron Beacon Journal: Nippon Steel proposal to buy US Steel has potential value
