US Steel, why the fuss?
On the campaign trail, Kamala Harris said that US Steel should remain American-owned and operated. Both Trump and Biden previously spoke out against the proposed merger of US Steel with Japanese company Nippon. Members of Congress on both sides of the aisle have also opposed it—a rare moment of bipartisan agreement.
We are in an age where Republicans and Democrats can’t agree on tax rates, immigration, education, healthcare, gun reform, voting rights, or pretty much any issue at all, and yet somehow, they have all agreed on opposing the merger of US Steel.
Why?
US Steel was once the most valuable company in the world. In 1901, it was the first company to become valued above $1 billion, double the US budget at the time, and made Andrew Carnegie the richest man on Earth.
US Steel helped build America by making steel for skyscrapers, bridges, automobiles, refrigerators, and plenty more. It reached peak employment of 340,000 workers while helping the US win WWII. Peak steel output happened in 1953, with almost 36 million tons of steel produced. US Steel has even been a staple of investments, with its place on the Dow Jones Industrial Average (DJIA), a list of the 30 most prominent companies in the nation.
But those days are long behind the icon of American industry. In 1991, it was removed from the DJIA. In 2022, US Steel had an output of 14.5 million tons and 15,000 workers. It is now the 27th largest steel manufacturer worldwide and has a value of ~$7 billion. Compare that to Nucor, America’s largest steel producer, 16th in the world, with an output of 20.6 million tons and a valuation of over $42 billion. US Steel is far from the company it once was.
US Steel has been struggling and likely needs a buyout to have any chance of thriving moving forward. American jobs, union jobs, are at risk if the company can’t get a better footing to stop shrinking. Nippon has made an offer to do just that.
They’re offering a premium on the stock price, investing almost $3 billion into older mills to keep them operating, and guaranteeing not to lay off any hourly workers before 2026.
Nippon is also a more technologically advanced company that can bring its technology to US Steel to improve and modernize operations. Nippon is the fourth-largest steel company in the world; this merger would make it third.
So why is there so much opposition to the deal?
The way politicians talk makes it sound like the reason to block the deal is because a foreign company is making the offer. US Steel is a fraction of America’s steel industry; the other large companies are wholly American-owned. Compare that to US Ports, which have many foreign owners, including Singapore and adversarial China.
Anheuser-Busch, the maker of Budweiser and several other iconic American alcoholic beverages, was bought by a Belgian company, Chrysler was acquired by an Italian company, and Bridgestone, another Japanese firm, purchased Firestone Tires.
America has a long history of foreign investments and purchases. It is a part of our Capitalist foundations. In this instance, having a foreign company purchase US Steel could be great for business and good for America. US Steel has said it would be forced to close those old union mills without the investment from Nippon.
Cleveland-Cliffs, America’s second-largest steel company, was also in the running to buy out US Steel, but Nippon had the best offer. Such a deal would have reduced competition within America’s steel market, which tends to be good for business but bad for consumers. Cleveland-Cliffs said it is still ready to purchase any union steel mills that US Steel shuts down. And despite all of the rhetoric about foreign entities buying businesses, no one minds that Cleveland-Cliffs recently acquired a Canadian steelmaker for just under $3 billion.
The reason so many politicians are really against this deal is because of the Electoral College.
US Steel is headquartered in Pennsylvania. The United Steelworkers Union, which has opposed the merger with Nippon despite the Japanese firm committing to honoring all union contracts, is located in Pittsburg. Pennsylvania is the most critical swing state in the 2024 presidential election, with 19 electoral college votes.
Biden needed to win Pennsylvania to win the election, and now Donald Trump is in the same position. Kamala Harris has a couple of paths to victory, but Pennsylvania is the most straightforward. The state is currently polling as a dead heat, with neither candidate having a clear lead.
This highlights the impact of the Electoral College. Presidential candidates focus more on a merger that would otherwise go unnoticed and unfelt by almost the entire nation while speaking little about a merger by a grocery giant that would worsen food prices for all of us.
The Electoral College was created for two reasons. The first is that the Northern states were already opposed to slavery by the time the Constitutional Convention was held, and the Southern states were concerned that a popular vote would result in anti-slavery Presidents due to the North having a much larger free population than the South.
It is worth noting that the Confederacy officially formed and fired off the shots that ignited the Civil War soon after Abraham Lincoln was elected.
The second reason was that a group of politicians wanted Congress to elect the President instead of the people, which is why the rule exists that if no presidential candidate receives 270 EC votes, then the House of Representatives gets to elect the President.
Neither of those ideals is one that Americans agree with today, and many didn’t agree with when our nation was founded.
I’m not claiming that the Nippon merger is the best path for US Steel to take. I don’t have that answer. However, the right decision should be determined by analyzing data to find which outcome is best for market competition, employee prosperity, and the company’s future. Not by what statement polls best with undecided voters in Pennsylvania.
https://www.cnn.com/2023/08/19/business/us-steel-steelmaking-history/index.html
https://www.barrons.com/articles/us-steel-takeover-harris-a62b479e
