President Biden Poised to Block Nippon Steel’s Acquisition of U.S. Steel

What Happened?

The Committee on Foreign Investment in the United States (CFIUS), which is a U.S. Treasury Department-led panel, deadlocked yesterday on whether to approve Nippon Steel’s acquisition of U.S. Steel, leaving the decision up to President Biden.

As David Lynch and Jeff Stein of the Washington Post reported:

‘Biden has publicly opposed the transaction since March, saying it was “vital” that U.S. Steel, the nation’s third-ranked steel producer, remained American-owned. Even as lobbying around the deal continued in recent days, White House aides said they expect him to block the deal.’

CFIUS issued a statement Monday claiming that allowing the Japanese industrial giant to purchase the once-iconic U.S. company could lead to a reduction in domestic steel output, which would represent ‘a national security risk.’

In response, Nippon Steel said they could eliminate such risk by ensuring U.S. citizens were appointed to top-level management and board of director positions at U.S. Steel after the acquisition. But CFIUS remained divided over whether or not those measures would be effective.

Why it Matters

David McCall, President of the United Steelworkers Union, has vocally opposed the deal, saying it would be bad for American workers. Mr. McCall has criticized the proposed deal, claiming:

‘U.S. Steel last year revealed plans to sell out to Japanese-owned Nippon Steel, and it was immediately clear who would benefit: not the American people, not workers, but executives and shareholders. That’s it. This proposed deal isn’t about pursuing the promise of America, its about pursuing a quick buck. In fact, U.S. Steel CEO David Burritt stands to lock down a $70 million buyout if the deal is approved.’

The Biden Administration has also cited national security risk as the basis for a potential blockage of the deal. It claims the acquisition could cause domestic steel production to fall. This would imperil the production of military equipment such as ships, tanks, and aircraft.

Nippon Steel would likely undertake a legal challenge if President Biden blocked the deal. Lawyers for Nippon Steel have already claimed the CFIUS review was ‘littered with factual inaccuracies and omissions, misleading and incomplete statements, conjecture and hypotheticals that have no basis in fact and are plainly illogical.’

How it Affects You

According to federal law, President Biden now has fifteen days to make a decision on the fate of the $15 billion deal. That means a decision will be made before President-Elect Trump takes office, although Mr. Trump has also publicly voiced his opposition to the acquisition. It is likely Mr. Biden will block the deal, but it remains unclear whether his action would survive legal challenges.

Advocates for the deal say the acquisition would actually benefit both U.S. Steel and its workforce, claiming the company has suffered from years of mismanagement which has led to shrinking production and profits.

Proponents of the deal see the acquisition as a way to bring U.S. Steel under new management to correct the problems currently plaguing the once mighty company.