U.S. Steel’s wild week: a $1 billion promise, threat to leave and a potentially blocked deal

The tension between supporters and opponents of Nippon Steel’s attempt to buy U.S. Steel had been simmering for months in the Pittsburgh region.

After Nippon announced the $14.9 billion takeover deal in December, U.S. Steel’s stock price soared. But the United Steelworkers union opposed the plan, saying it didn’t do enough to protect their jobs and pensions.

And during a presidential election year, both President Joe Biden and former President Donald Trump said they opposed the deal. Biden directed a relatively obscure federal committee, The Committee on Foreign Investment in the United States, to look into whether the deal would put the country’s national security at risk. But little had changed in the ensuing months, and some experts speculated that Biden wouldn’t make a decision until after the November election.

The simmer has risen to a boil, however, after a billion-dollar investment offer, an anonymous White House leak and a threat to move thousands of local jobs out of the Pittsburgh region in just the past two weeks. These overlapping developments inspired rallies, pitted local leaders against each other, caused large stock price swings and became a prominent issue in the presidential election.

Vice President and Democrat Kamala Harris announced her opposition to the sale during a Labor Day rally in Pittsburgh, just before announcing her plan to prepare for her first presidential debate while spending the weekend in Pittsburgh — where the conflict was loudest.

“U.S. Steel is an historic American company," she said. "And it is vital for our nation to maintain strong American steel companies. And I couldn't agree more with President Biden: U.S. Steel should remain American-owned and American-operated.”

A wild week

The recent upheaval kicked off on Aug. 29 with a promise. Nippon Steel announced that it would invest an additional $1.4 billion to upgrade the blast furnace facilities it was buying in the Mon Valley and Gary, Indiana — with by far the biggest chunk going to the Pennsylvania facilities. (U.S. Sen. John Fetterman of Braddock had hinted that this offer was coming two days before Nippon announced it.)

“The investments announced today are major growth investments and represent additional capital spending that will extend the production life of two of U. S. Steel’s critical integrated assets and enhance the security of steel supply to American manufacturers,” Nippon Steel said in its announcement.

But after Harris announced her opposition to the deal on Labor Day, U.S. Steel organized a rally outside its headquarters Sept. 4 and said the company’s 3,700 jobs in the region are dependent on the sale to Nippon going through.

“We want elected leaders and other key decision-makers to recognize the benefits of the deal as well as the unavoidable consequences if the deal fails,” said U.S. Steel President & CEO David Burritt in a statement that coincided with his rally remarks.

“Without the Nippon Steel transaction, U. S. Steel will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, negatively impacting numerous communities across the locations where its facilities exist,” he said.

Before the rally ended, news had leaked that Biden was planning on blocking the sale. The Committee on Foreign Investment in the United States had concluded that there was no way to mitigate the security risks from a sale and would soon present its findings to Biden, according to three anonymous White House sources quoted by The Washington Post. The company’s stock price lost a quarter of its value within an hour after the report emerged — ending the day down 17%.

A region divided

Bernie Hall, the United Steelworkers’ Pennsylvania director, said the proposed sale doesn’t offer enough protection to the union’s workers.

“Publicly, they're saying, ‘We're not going to close any plants or lay anybody off,’” he said. “But when you look at the paperwork that they send us, there's a lot of caveats to that. One of them is, ‘If their business plan changes.’ Well, we can't rely on that. You can change your business plan at any moment.”

Hall said that when Nippon first announced its intentions to buy the company, Nippon committed itself to the company’s business plan — which increasingly included investing in non-union factories in Arkansas, rather than in the plants in the Mon Valley.

“You don't spend billions of dollars like this to buy these sorts of assets without having an idea of what you're going to do with them,” Hall said. “So their lack of transparency and being forthright with us also causes a lot of concern.”

Representatives for Nippon Steel didn’t respond to a request for comment for this story.

Hall said he believes most of the union workforce agrees with him but said some individual members may disagree. Dozens if not hundreds of those workers rallied outside the company’s headquarters to support the sale on Wednesday. Kevin Prickett, a manager at the Clairton Coke Works, told WESA during a political rally in July that he supports the sale.

“[Nippon has] made some really good statements about how they're going to let us still keep the name. We're keeping the company headquarters Downtown,” Prickett said. “They spend more in R&D than any other steel company in the world.”

Many of the union staff with whom Prickett works in Clairton also support the sale to Nippon, he contends. They also are Republicans who support Trump, he said. “There’s the union leadership and then there’s the union force,” he said. “And a lot of the workforce is behind President Trump.”

Prickett said he wasn’t aware, however, that Trump also has publicly opposed the sale to Nippon.

Hall said that, in a large union there is always some disagreement, but he said the “overwhelming majority” of the union’s members oppose the sale. And the union believes Harris is more likely to look out for the union’s interests than Trump is, he added. For example, he said, Nippon recently hired Mike Pompeo, the former secretary of state under Trump, as an adviser focused solely on pushing through the sale.

“I think it just goes to further show that Trump's interest in workers is fleeting and superficial,” Hall said. “And quite frankly, his actions don't match his words.”

The top elected Democrats in Pennsylvania and the Pittsburgh region — and the Republicans running against them — have been publicly united in their opposition to the sale: Gov. Josh Shapiro, Fetterman, Sen. Bob Casey and his Republican opponent Dave McCormick, and U.S. Rep. Chris Deluzio.

Deluzio said the deal, as currently been proposed, doesn’t include the kind of protections for workers that would garner his support — and he believes the companies should work directly with the USW to secure a deal that could be more widely supported.

“I think the fact that there's such agreement tells you about why that agreement ought to fail, and they ought to go back to the drawing board and negotiate something that can't and should pass scrutiny,” he said.

Whose economic concerns?

Stefani Pashman, the CEO of the Allegheny Conference on Community Development, the regional economic development organization, decided to make a public statement in support of the sale because she believes the stakes are so high, she told WESA.

U.S. Steel is the area’s largest advanced manufacturer, with 3,700 direct jobs that support another 7,300 jobs in the region. Pittsburgh’s population is flat, Pashman said, and its recovery from the COVID pandemic still lags the average jobs recovery seen in the country.

“Absent a Plan B of any other offer that would present that opportunity to retain U.S. Steel, retain the growth [and] retain the investment, we would support this transaction with the appropriate guardrails and regulatory structures put in place,” Pashman said.

U.S. Steel has struggled to invest in its Mon Valley plants on its own, and Pashman said she believes doing nothing is not an alternative for the company.

“We need investment capital. We need a real solution that creates a future for U.S. Steel,” she said. “Because staying independent is not working.”

Allegheny County Councilman Sam DeMarco, a Republican, said at the U.S. Steel rally that he supports the Nippon deal because he believes the investment the company attracts would ensure more jobs and income in the region.

“When I talk to elected officials in the Mon Valley, they talk about the problems they have with vacant properties, with blight, with a declining tax base,” he said. “This is a lifeline.”

Chardae Jones, a Democratic councilwoman from Braddock in the Mon Valley, said she believes it’s mostly state and federal officials who oppose the Nippon acquisition — but not local leaders who deal with poverty in places like Braddock — a community that has struggled with poverty since the steel industry’s collapse in the region.

“Have you been on the ground in my community?” Jones said.

Braddock relies on tax revenue from U.S. Steel’s Edgar Thomson Works, Jones said. She worries that, without Nippon’s promised investments in local mills, U.S. Steel’s operations could shrink or close altogether. Braddock residents have long had concerns about the pollution generated during steel production, and Jones thinks Nippon could clean up the Mon Valley Works.

The councilwoman was one of several city and borough officials from Western Pennsylvania invited by Nippon to visit its Wheeling-Nippon plant in Follansbee, West Virginia, about 50 miles from Pittsburgh. Jones said she interviewed employees there about Nippon, and that they told her that the Japanese company followed through on its plans to modernize technology and reduce emissions.

Chris Briem, an economist at the University of Pittsburgh, said the outsized response to the sale of Nippon Steel stands in stark contrast to the modest impact the company now has on the region’s economy.

“I think it's just literally the name U.S. Steel that I think has made it this hyper-political football,” he said. “U.S. Steel was the center of national attention when there was a strike in 1960 because … going on strike against the major steel plants had macroeconomic implications. It affected U.S. GDP. It affected unemployment across the nation. None of that is true now.”

Biden has not officially blocked the deal yet, and some experts are skeptical Biden will or that he will do it before the election. Biden officials say they are still waiting for the committee’s recommendation on potential risks, but several media outlets have reported the committee has already informed the two companies of its recommendations. U.S. Steel leaders planned to meet with the committee on Wednesday in an effort to salvage the deal, according to the Washington Post.

The committee can extend the process 90 days after it finishes its review, according to Nicholas Klein, a lawyer who advises clients on international trade and CFIUS matters. That could postpone the final decision until after the November election.

Klein is familiar with security reviews for interested international buyers as a partner and chair of the National Security and Global Trade practice at the global law firm DLA Piper. The U.S. intelligence community brings its knowledge of classified information to CFIUS, whose members are not political appointees and make recommendations based on economics and security risks alone, Klein said.

“It's pretty rare that [federal reviewers] block a deal,” Klein said.

Klein said the arguments that the deal threatens national security might not hold up. And even if the committee raises concerns, Nippon can work to address concerns before a deal is blocked.

“As far as I can tell, everything Nippon is doing — and what they've offered as part of their mitigation proposal to the government — would certainly address that risk,” Klein said.