There appears to be at least two slivers of hope that the U.S. government might not reject Nippon Steel’s nearly $15 billion purchase of U.S. Steel. But whether these slivers warrant even that modicum of optimism remains to be seen.
Sliver, the first:
After the Bloomberg news service reported in unequivocal fashion that President Joe Biden, based on the “national security” recommendations of the Committee of Foreign Investment in the United States (CFIUS), would be, in fact, killing the deal, the Reuters news service said “Hold the phone!”
“A national security review of Nippon Steel’s $15 billion bid for U.S. Steel is ongoing and President Joe Biden will see what it yields before making a decision on whether to block the deal, the White House said on Tuesday, cautioning he still opposes the tie-up.”
It was in September that CFIUS told Nippon and U.S. Steel that their merger would create national security risks “because it could hurt the supply of steel needed for critical transportation, construction and agriculture projects,” Reuters says.
That’s difficult to fathom, given the facts on the ground: Nippon has promised to spend billions of dollars to not only maintain U.S. Steel’s operations/capacity but to upgrade them. Supply does not appear to be a real issue. And neither does, as we’ve noted previously, national defense.
Reuters reminds that CFIUS has until Dec. 22 to make a decision on whether to approve, block or extend the timeline for the deal’s review.
But even if that extension should outlast Biden’s term, President-elect Donald Trump has said he also opposes the merger.
But that’s in direct conflict with what Trump said this past week, as Reuters also reported.
Sliver, the second:
Trump said on Tuesday that any person or company investing at least $1 billion into the U.S. “will receive fully expedited approvals and permits, including, but in no way limited to, all environmental approvals.”
The Nippon-U.S. Steel merger would, by various accounts, result in at least $18 billion in investment in the U.S. And Nippon’s promised $5,000 bonuses to U.S. Steel employees (while honoring existing contracts), valued at tens of millions of dollars more, isn’t too shabby either.
A CFIUS/presidential rejection would have a serious domino effect for the Pittsburgh-area economy. U.S. Steel not only says it would not have the resources to maintain, let alone upgrade, its Pittsburgh-area mills but that it would move its headquarters out of Pittsburgh.
A much needed massive foreign investment from one our closest allies would be lost. A major part of a major industry would be lost. And jobs, lots of jobs, would be lost.
That strikes us as the real threat to America’s national security.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
