Japanese buyer sends Biden new U.S. Steel proposal in final bid for support

Nippon Steel proposed giving the U.S. government a veto over any reduction in U.S. Steel’s “production capacity” in a last-ditch bid for President Joe Biden’s approval to acquire the venerable American steelmaker, according to a document sent to the White House on Monday.

The proposal is aimed at mollifying the Committee on Foreign Investment in the United States, or CFIUS, which warned last week that Nippon Steel’s $14.9 billion takeover of U.S. Steel could lead to a decline in domestic steel output that would pose “risks to the national security of the United States.”

The president has publicly opposed the takeover for months, leaving him at odds with many of his advisers who favor the deal, according to two senior administration officials, who spoke on the condition of anonymity to discuss internal deliberations.

Biden is siding with David McCall, the president of the United Steelworkers union, who has blasted Nippon Steel’s bid as “bad for workers” and questioned the company’s commitment to U.S. Steel’s unionized operations.

As White House deliberations continue, administration officials for the first time are considering an approach that would leave a final decision to the Trump administration, said the two administration officials and an industry executive who also spoke on the condition of anonymity.

Biden, who faces a Jan. 7 deadline for a final decision, could condition approval of the takeover on Nippon Steel complying with a set of additional requirements, such as the preservation of American jobs, one of the administration officials said. Hammering out those details could push the matter past Inauguration Day.

U.S. Steel’s share price rocketed almost 14 percent Tuesday on news of the latest developments, before closing up 10 percent.

In its new proposal, Nippon Steel offered a 10-year guarantee that it would not reduce production capacity at U.S. Steel’s mills in Pennsylvania, Indiana, Alabama, Texas, California and Arkansas without approval by the Treasury-led review panel.

U.S. Steel has major operations in Indiana employing about 4,000 people. The company founded the city of Gary in Indiana in 1906 with its Gary Works operation that at one time employed some 30,000 people. The steelmaker also operates the Midwest Plant in Portage.

Nippon has several subsidiaries in Indiana, including Nippon Steel Pipe America in Seymour, Suzuki Garphyttan Corp. in South Bend, and Nippon Steel & Sumikin in Shelbyville.

The Japanese company offered a similar pledge regarding a mostly idle mill in Granite City, Illinois, which would last for two years, according to the document, a joint letter to CFIUS from the companies that was seen by The Washington Post.

The new language goes beyond Nippon Steel’s previous agreement to limit any production cuts to those approved by independent members of U.S. Steel’s board, who would be appointed subject to CFIUS approval.

Even with the new conditions, U.S. Steel’s actual output could rise or fall in line with customer demand.

But to maintain “production capacity” – or ability to produce a given amount of steel – for a full decade, Nippon Steel will need to invest “many billions of dollars” in addition to its existing commitments, according to a person familiar with the company’s thinking, who was not authorized to speak about the matter.

Nippon Steel has already pledged $2.7 billion in new investment for U.S. Steel’s unionized operations in Pennsylvania’s Mon Valley and in Gary.

Coupled with Nippon Steel’s promise to rule out layoffs or closures of any unionized facilities for the duration of the current union contract, which expires in September 2026, the new proposal effectively places the burden of adjusting to any future economic downturn on U.S. Steel’s nonunionized operations in Arkansas, the person said.

“By providing assurances against reductions in production capacity – which assurances will be legally binding and enforceable by the U.S. Government – Nippon Steel is underscoring the ironclad nature of its commitments to U.S. Steel and its union-represented employees,” the companies’ Dec. 30 letter said. “By contrast, without this Transaction, given limited resources, U.S. Steel will revert to its pre-Transaction strategy of deprioritizing existing, union-represented facilities.”

The companies’ revised “national security agreement” was addressed to White House Chief of Staff Jeff Zients, White House Counsel Ed Siskel, and Andrew Fair, the acting assistant treasury secretary for investment security, who coordinates the internal CFIUS process.

“We received the CFIUS evaluation and the president will review it,” said Robyn Patterson, a White House spokeswoman.

Since announcing its planned purchase of U.S. Steel in December 2023, Nippon Steel has been engaged in an awkward courtship of the steelworkers union. But in recent weeks, as a deadline loomed for final government action, the relationship has deteriorated into open hostility.

McCall, who backed an alternative bid by rival steelmaker Cleveland Cliffs, accused Nippon Steel of planning to shift work from U.S. Steel’s unionized blast furnaces to a nonunion facility in Arkansas. And he pointedly complained that Nippon Steel has a history of dumping, or selling below production cost, foreign steel in the United States.

McCall on Tuesday dismissed Nippon Steel’s latest initiative. “Both U.S. Steel and Nippon have been deliberately misleading in their public statements and communications to our members, making splashy – but ultimately unenforceable – claims about the future of our facilities,” he said in a statement.

Nippon Steel has fired back in its communications this month with CFIUS, saying that McCall sought to leverage his political relationship with Biden to kill the deal. The steelworkers union endorsed Biden in 2020 and this year.

“Mr. McCall has made clear from the beginning his intent to use his relationship with President Joe Biden to subvert the CFIUS process and block the Transaction,” attorneys for the two companies wrote this month.

The steelworkers union also is split over the sale of U.S. Steel. While McCall and other top officials remain implacably opposed, rank-and-file union members who work in some of the aging mills that the Japanese company has promised to modernize are supportive.

The union and management are at odds over prospects for U.S. Steel if the Nippon Steel deal collapses. McCall has argued that the company can survive on its own. But David Burritt, U.S. Steel’s chief executive, said in September that the deal’s failure would put “thousands of good-paying union jobs at risk” and could lead to the company relocating its Pittsburgh headquarters to another state.

Nippon Steel also improved its proposal by agreeing to “ensure U.S. Steel has sufficient resources” to support any future U.S. government trade complaints against foreign steel producers. The pledge came in response to a Dec. 14 CFIUS letter, which said that U.S. Steel – once owned by a Japanese company – “could reduce its participation in U.S. trade remedy investigations and reviews.”

In a third change, Nippon Steel offered to appoint a “full-time board observer” subject to CFIUS approval, who would attend all U.S. Steel board meetings and monitor compliance with the agreement.

The Japanese steelmaker had previously pledged to appoint U.S. citizens to top U.S. Steel management jobs and a majority of board seats after the merger. But in a Dec. 23 letter, CFIUS said it was unable to reach a consensus on whether those steps would be sufficient to alleviate the government’s national security concerns.

With the committee deadlocked on that issue, a final decision fell to Biden, who has publicly opposed the acquisition.

“U. S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated,” the president said in March.