UPDATE: Biden blocks Nippon’s acquisition of U.S. Steel

President Joe Biden on Friday officially blocked Nippon Steel’s proposed purchase of U.S. Steel, a once-iconic American company whose sale to a foreign buyer he publicly opposed for months.

The announcement came in a presidential order posted on the White House website, declaring Nippon Steel’s $14.9 billion bid for the U.S. steelmaker “prohibited.” If completed, the deal “threatens to impair the national security of the United States,” the president said.

Biden opted to kill the deal despite intense efforts in recent days by some of his senior advisers, who warned that rejecting a sizable investment from a top Japanese corporation could damage U.S. relations with Japan.

Nippon Steel and U.S. Steel have vowed to pursue legal action against the government, claiming it failed to follow proper procedures during its consideration of the acquisition.

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.

Biden’s decision comes just days after Japan-based Nippon proposed giving the U.S. government a veto over any reduction in U.S. Steel’s “production capacity.” The proposal was aimed at mollifying the Committee on Foreign Investment in the United States, or CFIUS, which warned last week that Nippon Steel’s 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.”

CFIUS failed to reach consensus on the possible national security risks of the deal last month and sent a long-awaited report on the merger to Biden who had 15 days to reach a final decision.

The committee, chaired by Treasury Secretary Janet Yellen and made up of other Cabinet members, can recommend that the president block a transaction, and federal law gives the president that power.

A U.S. official familiar with the matter, who spoke on condition of anonymity, told the AP last month that some federal agencies represented on the panel were skeptical that allowing a Japanese company to buy an American-owned steelmaker would create national security risks.

The move, which comes just weeks before the Democratic president is set to leave office, could potentially damage relations between the U.S. and Japan, which is America’s biggest ally in Asia. Japan is also the largest foreign holder of U.S. debt.

Biden previously came out against the deal last March—and was backed by the United Steelworkers, concerned over whether the company would honor existing labor agreements or slash jobs as well as the firm’s financial transparency.

“It is important that we maintain strong American steel companies powered by American steel workers,” Biden said in a March statement, while he was still seeking reelection to the presidency before dropping out of the race. “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.”

President-elect Donald Trump had also opposed the acquisition and vowed in December on his Truth Social platform to block the deal and to use tax incentives and tariffs to grow the company. Steelworkers’ union President David McCall said last month that the union welcomed Trump’s opposition to the sale and said “it’s time for this deal to be rejected so we can all focus on the future.”

Nippon Steel announced in December that it planned to buy the Pennsylvania steel producer for $14.1 billion in cash—and despite committing to keep the U.S. Steel name and Pittsburgh headquarters—its proposal raised concerns about what the transaction could mean for unionized workers, supply chains and U.S. national security.

Still, the deal had many supporters, including lawmakers and business groups like the U.S. Chamber. Mike Pompeo, who served as Trump’s first secretary of state called a potential rejection of the deal “shortsighted” in the Wall Street Journal.

“The deal would strengthen U.S. Steel’s current operations and production capacity, benefit its workers and their communities, and enhance the competitiveness of the American steel industry,” he wrote in December.

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

Gary Mayor Eddie Melton was one of 20 mayors—the rest from western Pennsylvania—who had signed a letter of support for the deal.

“Our communities in the Mon Valley of Pennsylvania as well as Gary, Indiana, are made up of working-class American men and women whose identity and livelihood depend on the success of U. S. Steel,” Melton and the mayors said in the letter. “As such, they overwhelmingly support the vision and commitments that Nippon Steel has introduced to ensure that their jobs are protected and that their local facilities stay open.”

This week, Nippon made additional promises this week that gave the U.S. government some power over changes the company might have made in production.

The new language went 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 approval by the

Even with the new conditions, however, U.S. Steel’s actual output could have risen or fallen in line with customer demand.

U.S. Steel’s next step is not clear. The Pittsburgh-based steelmaker could resume its search for a buyer. Previous bidders include Cleveland Cliffs, the second-largest domestic steel producer, which offered $7.3 billion to acquire the company in 2023.

U.S. Steel also could opt to proceed as a stand-alone company. But CEO David Burritt already has warned that it lacks the financial resources needed to reinvigorate some of its aging blast furnaces in Pennsylvania’s Mon Valley and in Gary.

CFIUS acknowledged the company’s continued struggles, saying it “has a history of inadequate attempts to improve its competitiveness with frequently changing operational priorities.”

Many of those who objected to U.S. Steel’s sale cited its storied history. The company was formed in 1901 by business legends including Andrew Carnegie and J.P. Morgan. It was the nation’s first billion-dollar corporation, and its output shaped landmarks like the Empire State Building, the Superdome in New Orleans and San Francisco’s Bay Bridge.

During World War II, U.S. Steel’s mills forged many of the tanks, ships and aircraft that defeated the Nazis.

The steelmaker’s glory days, however, were long gone by the time Nippon Steel came calling. U.S. Steel employed 21,803 workers at the end of last year, fewer than half as many as 20 years ago.

Its 2023 sales of $18 billion fell 14 percent from the previous year. Profits of $895 million were down by almost two-thirds over the same period, according to securities filings.

The company’s annual output ranks 27th in the world, according to the World Steel Association. Nippon Steel’s ranks fourth.