Steelworkers Push Back Against $14 Billion Deal for U.S. Steel as Vote Looms
Nippon Steel pitches new investment in aging plants to help win union’s support for planned deal; union leaders say they are unconvinced
United States Steel’s X 0.29%increase; green up pointing triangle Mon Valley Works mill in recent years has endured a debilitating fire and millions of dollars in regulatory fines. The steelmaker abandoned plans for a $1.2 billion upgrade, and analysts have speculated that the mill could eventually close.
Now, the collection of aging plants along the Monongahela River southeast of Pittsburgh is taking on a central role in Nippon Steel’s 5401 0.20%increase; green up pointing triangle $14.1 billion gambit to acquire 123-year-old U.S. Steel X 0.29%increase; green up pointing triangle, whose shareholders are set to vote on the deal Friday.
Union workers who staff U.S. Steel’s last production sites in the region of what was once America’s Steel City have been stewing over the company’s 2021 decision to shelve the planned upgrade, which would have been the biggest investment in Mon Valley in decades.
Stung by U.S. Steel’s decision to expand production at a nonunion plant in Arkansas, the United Steelworkers union has accused executives of turning their backs on plants that have served the company for more than a century.
Leaders of the union, which represents about 10,000 hourly U.S. Steel workers, are opposing Nippon Steel’s planned takeover of the company. After years of plant closures and workforce reductions under U.S. Steel, the union and its allies in Congress have said that the deal could lead to further underinvestment in plants and undermine U.S. national security.
To change their minds, Nippon Steel has told union leaders that it would consider reviving U.S. Steel’s plans for Mon Valley as part of an offer to the union to invest $1.4 billion in upgrading U.S. Steel’s older mills. Nippon Steel executives have pledged to refrain from layoffs and plant closings through the end of the United Steelworkers’ current contract in 2026.
So far it isn’t enough.
“I don’t believe it. Prove it,” said Don Furko, president of the union local for U.S. Steel’s coking coal plant for Mon Valley. “They would have to give us some details about what they plan on doing.”
United Steelworkers leaders said they want a formal commitment from Nippon Steel for its planned investment and other changes.
Opposition formed quickly after Nippon Steel and U.S. Steel announced their deal in December, and it hasn’t budged. Democratic and Republican lawmakers have called for the deal to be stopped. President Biden signaled opposition to foreign ownership of U.S. Steel last month, though he didn’t say explicitly that he would block the deal, which is now under national-security review by the Committee on Foreign Investment in the U.S., under the Treasury Department.
That review is expected to take months. Opponents cite Nippon Steel’s business in China as potential grounds for blocking the sale. The committee can recommend that the president block a deal, but it usually prescribes remedies to alleviate potential national-security problems. Consultants and lawyers said it would be unprecedented for a president to overrule Cfius if its review finds no security risks.
Nippon Steel said its business in China accounts for less than 5% of its total global production capacity. “The entities in which we invest in China have no control over our operations or business decisions outside of China,” the company said.
Behind the scenes, a rival steel company, Cleveland-Cliffs—which itself tried to acquire U.S. Steel last year with a lower bid—has been urging lawmakers to fight the deal. Cleveland-Cliffs Chief Executive Officer Lourenco Goncalves continues to proclaim his interest in taking another run at U.S. Steel if the Nippon Steel deal collapses.
The United Steelworkers union endorsed Biden’s re-election on March 20, about a week after the president said U.S. Steel should remain domestically owned.
Winning over the steelworkers union could help Nippon Steel neutralize many of the political obstacles to a deal. “The minute Nippon Steel and the steelworkers reach an agreement, all the opposition comes off the boil and goes away,” said Elena McGovern, managing director for Washington-based Capstone, a national security and business policy consulting firm.
That partly hinges on convincing the union that U.S. Steel will be a different company under Nippon Steel’s ownership.
When the deal was struck in December, Executive Vice President Takahiro Mori said the Japanese company found a “life partner” in U.S. Steel and expected to largely continue its business strategies. To U.S. Steel’s union critics, that suggested little change to the frayed relationship with the company. U.S. Steel in recent years has closed large steel mills near Detroit and St. Louis, shrinking the union workforce by about 4,000 jobs.
Contract negotiations in 2022 between U.S. Steel and the union dragged on for months before an agreement was reached. U.S. Steel agreed in the contract to invest $1 billion in unionized plants, less than half the amount in the previous contract.
U.S. Steel has had a checkered environmental record, particularly at Mon Valley, where a 2018 fire damaged the Clairton coke plant, knocking out emissions-control equipment for months. The episode drew safety complaints from the United Steelworkers and millions of dollars in environmental fines.
U.S. Steel said in 2021 its need to invest in steelmaking with lower carbon-dioxide emissions and difficulty in obtaining local permits caused it to shelve the $1.2 billion upgrade of the Mon Valley Works, which would have reduced the production time for sheet steel with a new caster and a new rolling line.
“We know that this difficult decision is the right one for the business,” CEO David Burritt told analysts in April 2021. U.S. Steel redirected money and equipment for the Mon Valley upgrade to a new, nonunion mill in Arkansas. As that mill’s production capacity has expanded, U.S. Steel has closed older mills.
Nippon Steel said it would honor the terms of the 2022 labor contract. The United Steelworkers union doesn’t have the right to simply reject Nippon Steel as a buyer, but the contract contains a successorship clause requiring the company to maintain benefits, pensions, profit-sharing and other provisions specified in the existing labor agreement.
The union filed a grievance against U.S. Steel, saying the company didn’t keep the union informed about acquisition offers. U.S. Steel said it complied with all requirements in the labor agreement and called the Nippon Steel deal the best path forward for employees.
The union on April 2 said it rejected a draft of a binding commitment to the labor agreement offered by Nippon Steel, because the company included conditions or exceptions that the union said could be used to avoid commitments.
“For every commitment that the Nippon parties purport to make, the proposal envisions a way to release Nippon from these pledges,” United Steelworkers International President Dave McCall wrote in a letter to Mori.