Striking Down the Nippon Deal

[Omaha Steve]

No link. From email.

National security requires worker security—and some worker power—too.
Yesterday, U.S. Steel (USS) and Nippon Steel sued President Biden and other administration officials, as well as the president of the United Steelworkers union and rival steel manufacturer Cleveland-Cliffs, over Biden’s rejection of the sale of USS to Nippon. In their legal briefs, they argued that Biden’s decision had been improperly politicized and that the union and Cleveland-Cliffs had engaged in an illegal conspiracy to keep the sale from going through.

This latter contention is, shall we say, novel—so much so that it’s hard to believe the litigants mean it to be taken seriously. (I believe the technical legal term for the underlying basis of the conspiracy charge is "sour grapes.&quot Cleveland-Cliffs, after all, was a rival bidder for USS, so its opposition to the proposed sale to Nippon was a normal part of both capitalism and human behavior. As the union of USS’s workers, the Steelworkers had a clear interest in favoring a sale to Cleveland-Cliffs, one of the relative handful of American companies that have good relations with their workers’ union, and being wary of a sale to Nippon.

Whence that wariness? After all, Nippon had made a number of promises to the union about investing in USS’s unionized plants. (USS has a newer, non-union plant in Arkansas, which features a less costly though less comprehensive mode of production, as well as lower wages and benefits.) In unpacking Nippon’s pledges, however, the union grew concerned. Nippon had pledged to put $1.4 billion of its capital into the unionized plants, ostensibly to a project of modernization, though Nippon never said that explicitly. However, says Steelworker President David McCall, USS takes a depreciation allowance of $700 million per year on those plants’ equipment, which meant that that $1.4 billion would simply go to two years’ worth of repairs on and maintenance of old equipment. "That became clear in the meeting we had with [Nippon CEO Takahiro] Mori and [Pennsylvania Gov. Josh] Shapiro around Thanksgiving," McCall says.

Even more unsettling, as Bloomberg News recently revealed, the confidential mitigation agreement that Nippon reached with CFIUS (the Committee on Foreign Investment in the United States, which is the interagency body empowered to approve or reject the purchase of U.S. firms by foreign companies) contained a "force majeure" clause that enabled Nippon to void all the investments it had pledged to make if it faced "labor actions, including strikes, lockouts, boycotts or picketing."

"All the investments they’d proposed, their promises to keep our plants up and running, would be null and void," McCall says. "So we go into bargaining in 2026 [when the union’s current contract expires] and Nippon wants to cut our health care. We refuse to go along, we picket, we strike—and they drop all their commitments."

Small wonder the union remained concerned. Even more fundamentally, USS’s deal with Nippon had been negotiated and announced without any notification to the union, despite USS’s previous agreement with the union that it would be part of that process. Nor had Nippon agreed to sit down with the union during the many months since the deal had been announced until it was summoned to the meeting convened by Shapiro six weeks ago. The union’s fears that Nippon would shift production to Arkansas or the even lower-wage world of nations with developing economies were never assuaged; in fact, they only increased.

What about the other lawsuit—the one filed against the Biden administration for politicizing the CFIUS process? The charge that Biden only rejected the sale because he was seeking the Steelworkers’ backing is silly. Virtually every union, save the Teamsters, backed Biden, whose actions on worker rights, new factory creation, and industrial policy and foreign competition (he maintained tariffs on steel-exporting China) made clear he was not only the most pro-union president in our history, but also the most pro–domestic manufacturing president since globalization had made that an issue. The Steelworkers, moreover, had supported Democratic presidential nominees since they were founded in the late 1930s.

But, allege the critics of Biden’s striking down the sale to Nippon, there was no basis to his claim that the sale imperiled national security, which is the criterion by which CFIUS and the president are supposed to decide. In response, the union points out that the mills at the factories it represents have the kind of blast furnace production that produces military-grade steel, while the other domestic steel mills, such as USS’s in Arkansas and those of non-union producers like Nucor, use electric arc production incapable of turning out that kind of steel. "Our steel builds the submarines and aircraft carriers at Newport News," McCall notes. "That steel requires blast furnaces."

That said, I think there’s even a more fundamental reason behind Biden’s rejection of the deal, and it concerns his own conception of national security. A secure nation, a stable nation, Biden believes, is one with a vibrant middle class, and, as he has repeatedly said, "unions built that middle class." He viewed rebuilding that middle class as the central mission of his presidency, and he understood that that mission required a stronger union movement. If those beliefs "biased" his decision, those of us who share it, and those of us who understand that worker power and the broadly shared prosperity it produces are essential to preserving democracy, have to hope that future presidents are similarly biased in the Biden way.
~ HAROLD MEYERSON