U.S. Steel sale unlikely without union support

Illinois Correspondent

United Steelworkers (USW) has fired back against Nippon Steel and U.S. Steel in the ongoing campaign for support, while a rival steelmaker predicts the Nippon deal won’t go through.

“The chances of the acquisition going through are close to zero,” said Cleveland-Cliffs CEO Lourenco Goncalves at the American Iron and Steel Institute’s annual meeting, according to Mint. “We’re waiting for an end. It’s like a sick patient that sits on a bed with a bunch of tubes and sensors around him. He is still alive, but for what?”

Goncalves has reiterated several times that he doesn’t believe the deal can go through without union support, and Cleveland-Cliffs is so far the only steel company that United Steelworkers has supported for purchasing U.S. Steel.

In April, Cleveland-Cliffs reiterated its willingness to buy the iconic steel company if the Nippon deal falls through. Goncalves said his bid has the full support of the U.S. government and both presidential candidates.

“It would be a silly movement to wait for the election in the hopes that a different outcome would be allowed to them, because I also have support from President Trump,” Goncalves said.

In the last week of May, Nippon chairman Takahiro Mori created a six-minute video addressed to U.S. Steel workers, as well as personally visiting mills, diners and community centers in Pennsylvania trying to get the workers on board, according to the Pittsburgh Post-Gazette. U.S. Steel CEO Dave Burritt also made a video encouraging workers to support the deal.

But USW President David McCall said in a statement cosigned by negotiating committee chair Mike Millsap that the Memorial Day weekend public relations blitz was a “dog and pony show” aimed primarily at steelworkers and elected officials.

“There is no end to their desire to keep their stock cash-outs and golden parachutes from slipping through their fingers,” McCall said.

“Our BLA requires the ultimate parent of any buyer to bind itself to the agreement,” McCall said. “Here, Nippon Steel is the ultimate parent, and it has not bound itself to our agreements.”

The case will be heard by a three-person panel of labor experts in August, according to the Pittsburgh Post-Gazette.

Meanwhile, Mori said that he believed the dialogue with the unions would be different after the election, according to Financial Times.

“I think there is a possibility of a calmer discussion once the political leverage of the USW is gone,” he said. “So, my determination to close as soon as possible has not changed.”

Mori has been meeting with local staff and elected officials in Pittsburgh and dispatching technical teams to review U.S. Steel mills, according to Bloomberg. Some options being discussed include increasing their pledge and providing greater guarantees around the labor agreement, while U.S. Steel leaders hold meetings with employees to discuss the Nippon plans and “correct any misperceptions.”

However, USW is unmoved, accusing Nippon of sidestepping their concerns. “Nippon Steel continues to evade becoming a party to the BLAs and the pension and insurance agreements,” wrote McCall in a separate release co-signed by Millsap.

“And what’s worse, today’s letter says nothing about Nippon’s previous promises, however flimsy, to make capital expenditures in our facilities, avoid layoffs, provide the USW with information to audit profit sharing, and other important concerns.”

McCall specifically referenced the Granite City plant in his concerns about wider problems for supply chains and national defense.

“America’s capacity to produce virgin steel from iron ore has already diminished with U.S. Steel’s shutdown of steelmaking at Great Lakes and the idling of steelmaking at Granite City,” he said.

U.S. Steel issued a press release on May 21 stating it needs to counteract “the long-running misinformation campaign,” initially laying blame on Cleveland Cliffs as “one of our competitors and unsuccessful bidder” and alleging that the steel company is trying to push false rumors to derail the transaction. Later it accused the union of delaying “to the detriment of the employees they represent.”

“Both (Nippon) and U.S. Steel remain as fully committed as ever to completing the transaction that will protect and grow U.S. Steel for generations to come, bolster competition and innovation in the American steel industry for the benefit of American consumers, and enhance U.S. national security,” the statement read.

However, McCall pointed out that Nippon representatives have testified before the International Trade Commission asking for tariffs to be lifted from Japanese-made products.

“Actions speak louder than words, and it is easy to see, putting aside their propaganda, how Nippon would treat U.S. Steel after the merger,” McCall said. “Where the interests of Nippon Steel and U.S. Steel collide, it is easy to see how Nippon would resolve that. But, not surprisingly, Nippon says nothing about all of the ‘outs’ that its lawyers have written that would allow it to escape these obligations.””

Meanwhile, the European Union gave its stamp of approval to the buyout in May as expected. Shares of U.S. Steel rose two percent upon the EU approval, though that wasn’t enough to make up for the losses throughout the negotiations. U.S. Steel has lost a quarter of its share value this year, according to Reuters.

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