Joe Biden came out against Japanese Nippon Steel’s takeover of US Steel, stating that the company should retain American ownership. “US Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated," said the US President in a statement, at risk of upsetting its key ally. US Steel stock tumbled nearly 13% on Wednesday after President Biden expressed his opposition to the deal.
Nippon Steel’s $14.1 billion proposal to buy an iconic American steel company was opposed by several US lawmakers on national security grounds. In August 2023, US Steel rebuffed a $7.3 billion takeover from rival steelmaker Cleveland-Cliffs and launched a formal review of its strategic options. Since then, US Senators, including J.D. Vance, have been urging the company not to consider foreign buyers. Interestingly, the United Steelworkers (USW) union had supported the Cleveland-Cliff acquisition but had opposed any such arrangement with the Japanese company.
Experts believe that the deal suffered because of the bad timing, considering this is an election year in the country. As Joe Biden and his arch-rival Donald Trump are set for a rematch, both have vowed to bolster domestic manufacturing. In December, the White House said that the deal would require more scrutiny given the company’s core role in producing a material that is crucial for national security.
The president’s intervention in the transaction highlights the influential position the union of steelworkers and its president, David McCall have. "I told our steelworkers I have their backs," said Biden. According to the reports, the workers’ body is seeking written guarantees about honouring all the labour contracts.
According to Bloomberg, the Biden administration is investigating Nippon Steel's ties to China as part of its assessment of the US Steel deal, with a focus on increasing pressure on Beijing.
On March 15, 2024, Nippon Steel released a statement stating, "Transaction delivers clear benefits to US Steel, union workers, the broader American steel industry, and American national security.” It added that through increased financial investment and the contribution of our advanced technologies to US Steel, Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers in the critical industries that rely on American steel while strengthening American supply chains and economic defenses against China.
While addressing the concerns of steelworkers, it also said that the aim is to bolster and grow US Steel in the US market in a way that prioritises its talented employees. The company states that they have provided significant commitments to the USW in continued efforts to reach a mutually agreeable resolution. These include job security, pension security, capital investment, technology sharing, financial reporting, and the ability to enforce contractual obligations post-closing.
“Japan’s business community has been shocked by the strong reaction in Washington to the deal, especially since the US remains the most attractive mergers and acquisitions market for Japanese companies," reported the Financial Times.
Japan is the United States' fourth largest trading partner, and one of the top providers of foreign direct investment (FDI) in the country. Biden’s statement on the deal comes just ahead of Japanese Prime Minister Fumio Kishida’s visit to the US in April. He will be addressing a joint session of the US Congress during the visit. Both leaders will focus on ‘deepening’ ties between the nations.
As discussions continue and stakeholders navigate through the intricacies of this transaction, it remains to be seen how the outcomes will shape future business dealings and diplomatic relations between these two influential nations.
(Edited by : Ajay Vaishnav)
First Published: Mar 17, 2024 11:44 PM IST
