On Monday, U.S. Steel agreed to a takeover bid by Japan’s Nippon Steel for $14.1 billion. Ironically, U.S. protectionism played a role.Takeover DramaThe New York Times reports U.S. Steel to Be Bought by Japanese Rival After Takeover Drama
U.S. Steel, which was formed more than a century ago from a part of Andrew Carnegie’s industrial empire, has been weighing several takeover bids, including by a domestic rival, Cleveland-Cliffs. A little-known steel producer, Esmark, made an even larger bid — one that was light on details — before withdrawing days later.
In the end, U.S. Steel chose an offer by one of its biggest global competitors that was worth significantly more than Cleveland-Cliffs’ initial offer: Nippon Steel will pay $55 a share in cash, compared with the $35-a-share cash-and-stock bid that Cleveland-Cliffs made in August.
Analysts at BMO Capital Markets said that Nippon Steel’s bid came as a surprise, and that the price it offered was even “a bigger surprise,” representing a “hearty” valuation for U.S. Steel.
Once the World’s Largest CorporationCNN notes that US Steel Was Once the World’s Largest Corporation
US Steel has agreed to be bought by Nippon Steel, Japan’s largest steelmaker, in a $14.1 billion deal.
The deal marks the latest step in a gradual decline for the iconic 122-year old company, which was once the largest company on the planet. It was one of the first major conglomerates and a symbol of American industrial might.
But it is no longer even the largest US steelmaker, having been surpassed by Nucor Steel years ago.
United Steelworkers Union HowlsUSW News reports Union Slams Nippon Plan to Acquire USS
The United Steelworkers (USW) International President David McCall today issued the following statement slamming an announced deal in which Japan’s Nippon Steel will purchase U.S. Steel:
“To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long.
“We remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company.
“Neither U.S. Steel nor Nippon reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions.
“Based on this alone, the USW does not believe that Nippon understands the full breadth of the obligations of all our agreements, and we do not know whether it has the capacity to live up to our existing contract. This includes not just the day-to-day commitments of our labor agreement, but also significant obligations to fund pension and retiree insurance benefits that are the most extensive in the domestic steel industry.
Senator Fetterman OutragedThe Hill reports Fetterman says he’ll work to block ‘absolutely outrageous’ US Steel sale
Sen. John Fetterman (D-Pa.) vowed Monday to work to block the $14.9 billion sale of U.S. Steel Corp. to Japanese steelmaker Nippon Steel, which he described as an “outrageous” move.
“I live across the street from U.S. Steel’s Edgar Thompson plant in Braddock,” Fetterman said in a statement. “It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company. Steel is always about security — both our national security and the economic security of our steel communities. I am committed to doing anything I can do, using my platform and my position, to block this foreign sale.”
“This is yet another example of hard-working Americans being blindsided by greedy corporations willing to sell out their communities to serve their shareholders. I stand with the men and women of the Steelworkers and their union way of life,” he said in his statement.
U.S. Steel’s Sale Is Industrial Policy BoomerangThe Wall Street Journal has the story correct. “Protectionists paved the way for Nippon’s takeover of U.S. Steel,” says the Journal noting U.S. Steel’s Sale Is Industrial Policy Boomerang.
We have to admit to a smile as Washington’s protectionists howl about Japanese steel manufacturer Nippon Steel’s $14.1 billion deal to buy U.S. Steel. They apparently miss the irony that their tariffs and industrial policy have resulted in the foreign takeover of an iconic U.S. manufacturer.
U.S. Steel put itself on the auction block this summer and sought to strike a deal while the irony is hot. Trillions of dollars in Washington spending on public works and green energy are goosing domestic demand for steel while tariffs protect U.S. manufacturers against foreign competition. U.S. Steel’s best assets are political creations.
President Trump in 2018 slapped 25% tariffs on foreign steel under the pretense of protecting national security. Domestic steel producers lobbied for the tariffs, which they said would protect American workers from cheap foreign imports. Yet U.S. Steel’s workforce had shrunk to 22,740 at the end of 2022 from 29,000 in 2018.
The evidence shows that the tariffs have resulted in fewer downstream manufacturing jobs and raised prices for consumers, all while padding the bottom line of domestic steel makers.
The U.S. iron-and-steel-mill order backlog is currently at a 15-year high. Because U.S. steel makers can’t meet demand, projects will be delayed or contractors will have to pay higher prices for foreign steel. That’s bad for consumers. But the cosseted U.S. steel makers will benefit from higher prices and profits.
You can understand why Nippon wanted to get in on the Washington spending action, especially as manufacturing flags in Europe and much of the world. Nippon’s $14.1 billion bid is roughly double what Cleveland-Cliffs offered to pay for U.S. Steel this summer, which underscores the economic value of tariff avoidance.
Economic Value of Tariff AvoidanceThere’s a double irony in play. The Journal notes the USW supported the Cleveland-Cliffs’ courtship, the auto makers are worried about the potential behemoth’s pricing power.“The combined company would have controlled 100% of blast furnace production in the U.S. and 65% to 90% of domestic steel used in vehicles.”It will be interesting to see how Biden reacts to this mess that he and Trump created.US consumers are likely screwed one way or another.A Bipartisan Zeal for Nonsensical TariffsIn case you missed it, please see A Bipartisan Zeal for Nonsensical Tariffs that Raise Prices and Slow EV Progress
Tariffs are one thing that Republicans and Democrats, agree on. It’s economic madness.
Eliminating tariffs would literally speed up everything EV related.But the UAW does not want that, Biden does not want that, Trump does not want that, Republicans don’t want that, and Democrats don’t want that.See the above link for discussion.More By This Author:Shippers Avoid The Suez Canal, US Sends Warships, Costly DisruptionsHousing Starts Jump 14.8 Percent But Permits Sink 2.5 PercentIn China, Quiet Quitting Becomes Let It Rot And Lying Flat
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