Nearly a year after its announcement, Nippon Steel’s purchase of U.S. Steel is a paradox. On the one hand, the two countries, the United States and Japan, have never been closer. On the other hand, for the two companies, approval of the steel deal has been snared in politics.
For years, the United States has been looking to beef up its industrial base — which is the foundation of our military hardware. For instance, to advance ship-building, so dependent on steel, the Navy has been actively encouraging Japanese investment.
In the same cooperative spirit, Nippon Steel and U.S. Steel jointly announced their deal. In addition to the shared strategic concerns of the two countries, the two companies shared similar goals: They needed to expand scale and market share to afford the investments necessary to compete with other steelmaking countries, notably, China.
Indeed, in some respects, the deal was more like a merger. From the outset, Nippon agreed that U.S. Steel would keep its name and remain based in Pittsburgh.
Hence the paradox. The two countries, and the two companies, are close, but this deal is not over the finish line. In a December 10 report, Politico summed it up: “Perhaps no country developed as warm a relationship with the Trump administration as Japan did the first time around. But as Nippon Steel is making a controversial bid to purchase U.S. Steel, Japan grows as a linchpin of the U.S. strategy to contain China.”
For its part, mindful of this trans-Pacific containment alliance, China seeks to wedge the partners apart. Its propagandists celebrate the domestic divide over the deal. “Biden’s nixing of steel deal reveals little trust in ally,” cheered one headline in the state-owned China Daily. Another article cites opposition to the deal as evidence that the United States “poses the biggest threat to economic globalization by chipping away at the free market.” We can see the risk: If the steel deal falters, not only will the United States and Japan be weaker but China will be stronger.
There’s more going on here than geopolitics. At stake are jobs, livelihoods and ways of life. Mindful of those human concerns, the Pittsburgh Post Gazette in November published an editorial, headlined, “Time for post-election sanity: Approve Nippon-U.S. Steel deal.”
In the opinion of the newspaper, Nippon’s offer was “the best available offer for the legacy American steel company, and the only one likely to keep steel manufacturing in the Steel City.” The editorial continued, “The Japanese investment will save thousands of jobs in the Pittsburgh area alone, and possibly add many more.” The editorial concluded that blocking the deal would be “an act of economic vandalism.”
With so much on the line, what’s the hangup? Now, we come to a second paradox: The split between the leadership of the United Steel Workers, which opposes the deal, and the rank-and-file workers — the men and women who actually operate the factories — who support it.
This divide is no secret. In July, the United Steel Workers endorsed Vice President Kamala Harris, and most of its members seemed to support Donald Trump. That split was also seen in the steel deal.
On October 21, a group of Pennsylvania steelworkers appeared on Fox & Friends to talk of their support for Trump — and for the steel deal. Said one: “We are behind the sale” and the United Steel Workers opposed it. The worker declared, “Our international (union hierarchy) needs to get to the table, get the facts, and get to the membership.” As the others nodded in agreement, the point was clear: approve the deal, protect our jobs.
Powered by the support of blue-collar workers, Trump carried Pennsylvania in the election.
During the campaign, Trump said he opposed the deal, and since then, the Japanese have sweetened it considerably. As Bloomberg News reported, “Nippon Steel said it made new commitments with regards to where and when a previously announced $1.4 billion capital expenditure commitment would be spent.” The article noted that these commitments, part of a formal arbitration process, were “legally binding.”
For those who think in terms of “The Art of the Deal,” the terms have gotten much better. Will this upped ante be enough to bring over opponents? That remains to be seen. Yet, the Bloomberg story added an ominous note: “Collapse of the deal would renew questions about the future of steelmaking in Pennsylvania.”
That’s the danger: If a deal can’t be reached, Pittsburgh-area steelworkers could be unemployed, the American economy worsened, and the U.S.-Japan alliance weakened.
To state the matter positively, the steel deal offers the promise of more jobs, more economic prosperity and more national security.
Dealmakers are on notice: There’s a lot riding on an artful outcome.