Impasse deepens over U.S. Steel takeover as government review nears end

Face-to-face talks between Nippon Steel and the United Steelworkers union failed to close the gap over the Japanese company’s proposed acquisition of U.S. Steel as a government review of the politically charged transaction enters its final days.

In a previously undisclosed late November meeting, Takahiro Mori, Nippon Steel’s vice chairman, made a last-ditch effort to overcome the union’s opposition to the proposed $14.9 billion acquisition.

The talks with USW President David McCall were the first direct contact between the men in nearly five months. After concluding a November visit to Washington and Pennsylvania, Mori delayed his scheduled return to Japan to see McCall.

Mori subsequently offered what Nippon Steel described as legally binding commitments in a four-page letter to the union leader, detailing plans to spend “no less than” $2.7 billion modernizing U.S. Steel’s outdated blast furnaces.

But in a letter to U.S. Steel employees that Nippon Steel released Monday, Mori – who is scheduled to return to the United States from Japan this week – made clear that the two sides remain far apart.

“We had hoped that continued discussions with the USW leadership would result in their support for the transaction,” Mori wrote.

Instead, McCall, who has opposed the deal since it was announced one year ago, dismissed the detailed offer as “unenforceable” and reiterated his opposition.

“We recognize the offer is a good deal for (U.S. Steel) CEO David Burritt and some of his top executive management team and the institutional stockholders,” McCall said in a Dec. 3 video. “However, the union does not think it’s a good deal for workers.”

Union leaders say they believe that Nippon Steel plans to eventually shift production from U.S. Steel’s unionized mills in Pennsylvania to its nonunion electric arc furnaces in Arkansas. Mori insists the company has no such plans and, in fact, is offering those union facilities an investment lifeline that U.S. Steel cannot match.

The impasse comes as the Committee on Foreign Investment in the United States (CFIUS) prepares to conclude its review of the deal for potential national security concerns. In September, the Treasury-led interagency committee informed Nippon Steel and U.S. Steel that the deal could imperil domestic steel production needed for national security purposes.

Most independent analysts are skeptical of that claim, since Japan is a close U.S. ally.

The CFIUS panel is expected soon to issue its recommendation on whether the Biden administration should permit the deal to proceed.

Mori has said Nippon Steel hopes to complete the transaction by the end of this month. The Japanese company’s plans to invest in specific facilities in U.S. Steel’s Mon Valley Works outside Pittsburgh and Gary Works in Indiana have won support from local union officials who represent their workers.

Pennsylvania Gov. Josh Shapiro has been active in talks surrounding the deal, although he has publicly refrained from taking a public position on it. Shapiro, a Democrat, is “focused on protecting and growing Pennsylvania jobs” and plans to “continue to be actively engaged” in discussions, a spokesman said.

Nippon Steel has billed its purchase of U.S. Steel as strengthening U.S. supply chains and creating a powerful competitor to the Chinese steelmakers that dominate global markets. But there is little sign in Washington of political backing.

President Joe Biden vowed earlier this year to block Nippon Steel’s bid for the third-ranked U.S. steelmaker. President-elect Donald Trump on Dec. 3 reiterated his opposition to the deal, promising to rescue U.S. Steel with a mix of tax incentives and tariffs.

Trump’s statement came as a blow to many USW members who work at the mills that Nippon Steel plans to revitalize. During one of his final campaign rallies last month, Trump heard directly from steelworkers who back the deal. When he voiced no criticism of the deal in his subsequent rally remarks, Nippon Steel executives thought he might have rethought his opposition.

They were wrong.

As the CFIUS review nears a conclusion, Nippon Steel continues to insist the takeover will close.

“We believe that, following a fair and impartial review, we will obtain necessary regulatory approvals,” said the company’s letter to U.S. Steel employees.