Nippon Steel Vice Chairman Takahiro Mori, at lectern, with the mayor of Gary, Ind., Eddie Melton, left, last week. - City of Gary, Ind.
GARY, Ind.—In a meeting room facing the century-old plant of U.S. Steel, Takahiro Mori offered his vision for the plant’s next chapter under a new owner.
Flanked by steelworkers and city leaders, the vice chairman of Japan’s Nippon Steel last week pledged to invest nearly $950 million in U.S. Steel’s largest mill. Nippon Steel also offered bonuses to all U.S. Steel employees, amounting to $20 million for workers in Gary.
Mori was winning the room at City Hall. He hasn’t had the same luck in Washington, D.C., where political leaders control the deal’s fate.
A year has passed since Nippon Steel announced that it would buy U.S. Steel for $14.1 billion. The takeover bid has run into opposition from politicians and union leaders as well as skepticism from investors. Now the steel market is weak, and the clock is winding down on a national-security review that could precede President Biden blocking the deal.
Biden has yet to formally block the takeover, but the White House last week reiterated his position that U.S. Steel should be domestically owned and operated. President-elect Donald Trump has similarly rejected the Pittsburgh-based company being sold to a foreign firm, warning Nippon Steel in a Dec. 2 social-media post: “Buyer Beware!”
Investor sentiment in U.S. Steel is souring. Shares closed Tuesday at $31.94, the lowest level since September and well below the $55 U.S. Steel shareholders approved in April.
If the deal collapses, U.S. Steel Chief Executive Dave Burritt has warned that the company can’t match Nippon Steel’s planned investments, and would likely close plants and move its headquarters out of Pittsburgh.
A couple of hours after the sale was announced, the United Steelworkers union blasted the deal for failing to keep U.S. Steel “domestically owned and operated.”
The union, which represents about 10,000 hourly U.S. Steel employees, has stewed for years over layoffs and the company shifting production to a nonunion plant in Arkansas. It said Tokyo-based Nippon Steel could diminish U.S. Steel’s production capabilities so the company could import steel from Nippon’s plants elsewhere.
Nippon Steel’s Mori has spent months rejecting the union’s claims. “We believe steel is a local business, and U.S. customers should receive steel made in the United States,” he said last week.
Mori continues to doggedly campaign for support from mayors, governors and especially members of the steelworkers union. He has promised job security, $5,000 bonuses if the deal is completed and nearly $3 billion of investments in the company’s older plants to blunt the entrenched opposition to the deal from the union’s president, Dave McCall.
Union leaders panned Nippon Steel’s pledge to pay the bonuses as “simple bribery.”
U.S. Steel’s largest mill is in Gary, Ind. - Vincent Alban/REUTERS
The union’s opposition has helped Republicans and Democrats alike line up against the deal, despite Japan’s status as one of America’s closest allies. A panel of federal agencies has been evaluating the deal’s risks to U.S. national security and has a Dec. 23 deadline to complete its work. The committee’s report could give Biden justification for blocking the sale.
If the deal collapses, U.S. Steel will likely have a tough time in the near term boosting sales and profit on its own. Steel prices are down nearly 40% from a year ago. Buyers have repeatedly rejected price increases from steelmakers since the spring with plenty of cheaper steel still available.
“Last year at this time, steel prices were on fire. This year, it’s just blah,” said Jeremy Flack, CEO of Flack Global Metals, a Phoenix-based distributor of steel and aluminum.
If the deal is blocked, falling steel prices and weakening manufacturer demand make it unlikely that U.S. Steel would attract hefty offers from other deep-pocketed suitors, industry analysts said.
‘A good deal’
The yearlong struggle between the union and Nippon Steel has divided U.S. Steel employees and political leaders representing areas where mills are located.
Last week, hundreds of union members gathered at U.S. Steel’s Mon Valley Works mill near Pittsburgh to display support for the deal. In Gary on the same day, Mori picked up an endorsement from the city’s top official.
U.S. Steel founded Gary, named after the company’s chairman, in 1906 as a planned city to pair with the mill under construction at the same time on the southern shore of Lake Michigan.
U.S. Steel employees in favor of the Nippon deal rallied in downtown Pittsburgh in September. - Gene J. Puskar/Associated Press
Mayor Eddie Melton said U.S. Steel’s warning that some older plants would close if the deal collapsed was a factor in his decision to support Nippon Steel.
“For the city of Gary, this partnership would mean so much,” Melton said. “This is a good deal across the board for everyone.”
Some workers backing the deal have become critical of McCall, the union’s president, for not negotiating with Nippon Steel and risking thousands of jobs if mills close.
“I don’t think there will ever be another investment that will sustain jobs other than what Nippon is offering,” said Matt Albensi, 30, a crane operator with seven years of service.
Others, like David Morgan, support the union’s tough stance.
“We still work together where we have to, but it’s definitely strained,” said Morgan, grievance committee chairman for the union at a Mon Valley Works plant in West Mifflin, Pa., a site where local union leaders are supporting Nippon Steel.
Morgan, 50, who has worked for U.S. Steel for more than 20 years, said he objects to Nippon Steel’s Mori appealing to impressionable workers and plant-level union leaders after being rebuffed by McCall. “That doesn’t sit right with me,” he said.
