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Why the steelworkers union could crush Nippon’s bid for US Steel

Why the steelworkers union could crush Nippon’s bid for US Steel

Why the steelworkers union could crush Nippon’s bid for US Steel

Nippon Steel’s bid to acquire US Steel is in jeopardy over concerns about future job losses and plant closings, according to labor officials and previously unreported correspondence obtained by The Washington Post.

The United Steelworkers has fought the $14.9 billion deal since it was announced last December, with the backing of President Biden. The president is counting on the votes of members in Pennsylvania and other battleground states to win in November. Former President Donald Trump has said he would block the deal “instantly.”

Nippon Steel has made a generous offer to the union, including a promise of no layoffs or plant closings under the current contract and a $1.4 billion investment in union facilities, executives said in an interview with The Washington Post.

But the union says Nippon Steel’s proposal contains substantial loopholes that would allow it to withdraw from the union contract, leading to layoffs or plant closures. In a draft of the agreement Nippon sent to the union in March, obtained by The Post, Nippon said, for example, that it could abandon its promise not to carry out layoffs or plant closures in the event of an “unforeseen or significant downturn in the business”. conditions.”

“(Nippon) is going around saying there will be no layoffs or plant closings at any of our facilities,” said David McCall, president of the United Steelworkers, which represents 10,000 workers at the once iconic American company. “But everything is conditional… It is an absolutely empty promise.”

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McCall also told The Post that the proposal lacks guarantees that the Japanese steel giant will refrain from using the acquisition to undermine American steel production or direct its American investments toward non-union plants. Nippon Steel and other Japanese producers have a “well-established history” of dumping steel in U.S. markets, which has resulted in job losses, according to the union.

In recent years, the Commerce Department has imposed multiple trade sanctions on Nippon Steel and other Japanese steelmakers accused of selling products in the United States below their cost of production.

While the steelworkers union does not have the legal power to block a deal, its political influence, especially during an election year, is critical to the fate of the takeover. Biden and Trump are competing for union voters in swing states.

The United States has lost more than 50,000 steel jobs since 2000, according to Labor Department data, in part because of cheap steel imports from East Asia that have devastated steel communities across the industrial Midwest, labor experts say.

“There is a huge atmosphere of distrust about where this merger could be headed,” said Susan J. Schurman, a professor of labor studies at Rutgers University, highlighting recent efforts by US Steel to shift production to the non-union South.

Both the Justice Department and the Committee on Foreign Investment in the United States, led by the Treasury Department, are investigating Nippon Steel’s bid to buy US Steel, which could extend beyond November.

Meanwhile, Democrats, including Sen. Sherrod Brown of Ohio, who is locked in a tight race that could determine whether the party controls the Senate, sent a letter to the Biden administration on Monday saying the acquisition “represents a serious threat.” for “Americans”. manufacturers and workers.” The letter, also signed by Senators John Fetterman and Bob Casey, both of Pennsylvania, calls executive action to block the agreement “urgent.”

Nippon Steel is attracted to the United States because of its trade and industrial policies, officials told The Post. A combination of tariffs and quotas limits U.S. imports of foreign steel and aluminum. At the same time, demand for industrial metals is rising, thanks in part to Biden’s efforts to promote domestic production of semiconductors and renewable energy products.

If the merger is consummated, the combined company would become the world’s third-largest steel producer, gaining clout to fight large Chinese rivals on the global stage.

Nippon Steel told the union in December that its North American subsidiary would be financially responsible for “meeting all commitments” in the union contract, including benefits, health care and pensions for steel workers, according to a company letter dated December 18. December.

The union alleges that Nippon’s proposal violates its agreement with US Steel by not holding the Japanese parent company accountable for the union contract and instead leaving members exposed to the whims of a subsidiary.

But at least twice this year, the company indicated that responsibility for those contractual commitments would be shared by both Nippon Steel and its North American subsidiary. Those assurances represented a step toward the union’s demand that the Japanese parent company be responsible for fulfilling the union contract.

The union, however, remains dissatisfied. Enforcing its current contract after the merger could require the union to take Nippon Steel to court, a potentially lengthy process that McCall called “unacceptable.”

US Steel and the union will begin arbitration over this concern and other issues in August.

A US Steel spokesperson said in a statement that the company has “tried to resolve” the union’s issues and “move quickly through the arbitration process to reach a resolution,” but that the union “has repeatedly attempted to delay and request an indefinite postponement of the arbitration.”

Nippon Steel sees an opportunity to enter a growing market by acquiring the third-largest steelmaker in the United States, which operates both traditional blast furnaces and smaller, more efficient electric arc systems, and owns mines in Minnesota and Alabama.

The Japanese company believes it can cut carbon emissions from US Steel’s blast furnaces by half using experimental hydrogen-fueled technology, according to Takahiro Mori, vice president of Nippon Steel. The goal is to have such systems operational by 2030, he said.

This is an example of how the $500 million annually Nippon Steel spends on research and development could pay off for its U.S. target, Mori said.

“We are going to share all the fruits of this type of R&D and technologies. That makes US Steel very strong,” he stated.

US Steel shares have lost about 24 percent of their value this year as Biden’s opposition to the deal became clear. Nippon Steel’s U.S. shares are down nearly 7 percent over the same period.

The deal would bring the world’s fourth and 27th largest steel producer under Japanese ownership. Nippon Steel executives have vowed to retain the US Steel name and the Pittsburgh headquarters, a nod to the venerable steelmaker’s persistent hold on the public imagination.