U.S. Steel is threatening a shift away from integrated steelmaking, which it’s done in Northwest Indiana for nearly 120 years, if the $14.9 billion Nippon Steel acquisition falls through.
The steelmaker, one of Northwest Indiana’s largest employers and the founder of the City of Gary as a company town, said it could move away from making steel with blast furnaces like it does at its flagship Gary Works mill in favor of less capital-intensive mini-mill operations in the south.
U.S. Steel President and CEO David Burritt warned at a rally Wednesday that it could move its headquarters from Pittsburgh as well.
Burritt and other U.S. Steel employees rallied at the U.S. Steel Tower in Pittsburgh for a buyout and plan to call elected officials to make the case for Nippon Steel buying the company.
“Today’s rally is about displaying support for the transaction with Nippon Steel. We want elected leaders and other key decision makers to recognize the benefits of the deal as well as the unavoidable consequences if the deal fails,” Burritt said.
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Blast furnaces at U.S. Steel Gary Works in Gary.
Vice President and Democratic presidential nominee Kamala Harris said on Labor Day that she wanted U.S. Steel to remain American-owned and operated. President Joe Biden and Republican presidential nominee Donald Trump also have voiced opposition to a sale.
U.S. Steel warned there could be dire consequences if no merger takes place.
“Without the Nippon Steel transaction, U.S. Steel will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, negatively impacting numerous communities across the locations where its facilities exist, and depriving the American steel industry of an opportunity to better compete on the global stage,” the company said in a news release.
“In addition to moving away from integrated steelmaking, the lack of a deal with Nippon Steel raises serious questions about U.S. Steel remaining headquartered in Pittsburgh. The departure of U.S. Steel, a company that has been making steel in the Mon Valley since 1901, would deprive the Pittsburgh area of jobs, tax revenue, and community-based contributions.
“A 2023 economic impact study shows that U.S. Steel’s operations in (Pennsylvania) generated $3.6 billion in total economic impact, supported and sustained 11,417 jobs through its operations and purchases from the local supply chain, and generated $138.2 million in state and local taxes as a result of operations and capital spending.”
U.S. Steel has lost money in six of the last 13 years, including $1.6 billion losses in 2013 and 2015 and a $1.16 billion loss in 2020. It’s brought in $7.5 billion in profit over the last three years but its profit has started to slide as a result of a cooling steel market. Cleveland-Cliffs tried to buy U.S. Steel to consolidate all of the remaining integrated steelmaking under one banner, but U.S. Steel rejected that offer, put itself on the open market and got a $55 per share offer from Nippon Steel, which said it will run U.S. Steel as a U.S. subsidiary serving the North American market.
Nippon has promised $2.7 billion in investments at Mon Valley Works in Pennsylvania and Gary Works and said it would retain all the hourly employees and recognize the United Steelworkers union as its bargaining partner. U.S. Steel said it would not make those financial commitments on its own.
U.S. Steel’s Gary Works is shown.
USW District 7 Director Mike Millsap and International President David McCall described the company’s threats as “baseless” and “reckless.”
“While U.S. Steel continues pressing forward with its ill-conceived merger with Nippon, its executives clearly are getting increasingly rattled. The future of U.S. Steel has never been the sole domain of executives and shareholders, but with his $70 million change-in-control bonus on the line, CEO David Burritt has reached new lows,” they said in a prepared statement. “Up until now, Burritt has described USS as a world-class steel company, but now he is making baseless and unlawful threats, saying if the transaction with Nippon is rejected, the future of U.S. Steel as a viable steel company is at risk. His reckless statements and mismanagement are the only true obstacle to U.S. Steel remaining a sustainable steel company.”
The union faulted U.S. Steel for canceling billions of dollars of investments planned into Mon Valley Works in Pittsburgh just before buying the Big River Steel mini-mill in Arkansas, saying it would continue down the same path.
“Nippon stated on the day that the transaction was sprung on the public in December that it will continue to follow Burritt’s plan, which to date means running away from USW employees and the communities that have for decades made the company profitable,” Millsap and McCall said. “We’ve seen Burritt’s work in action as he’s sought to increase the short-term stock price but shrink stockholder value to restructure U.S. Steel as a mini-mill. The ‘plan’ has been to shut down steel making in Great Lakes and Granite City and expand Big River, to kill four tin lines, opening the market to Nippon’s imports.”
They questioned whether Nippon would go through with the promised investments, saying that a news release is not a contract and that Nippon has insisted on many conditions.
“With the latest announcement, we have every reason to believe that Nippon will simply make our finishing mills a destination for Japanese overcapacity of imported slabs. Today’s pathetic attempt to orchestrate a rally in downtown Pittsburgh shows that U.S. Steel is becoming increasingly desperate to save the deal,” Millsap and McCall said. “Nippon’s $55 per share offer is a significant premium to stockholders, and it will no doubt enrich Burritt and his top executives. But the merger sells out the future for workers, the retirees, the communities and jeopardizes our nation’s ability to produce the melted, poured and finished steel products that we need for our national defense and critical supply chain. Burritt’s harassment, threats and bullying of loyal employees won’t work and they must stop.”
The union questioned whether the deal had any path forward when the administration could block it on national security concerns regardless of the results of the November election.
“Dave Burritt wasted the past year pursuing this merger, and he has failed. It’s time for the board of directors to hold Burritt accountable for his reckless leadership, which risks turning an iconic American steelmaker into a foreign-controlled subsidiary of a Houston-based shell company – with serious adverse consequences for our economic and national security,” Millsap and McCall said. “The fact remains: U.S. Steel would hold no value, would not be world class, without the hard work and tireless dedication of generations of USW-represented Steelworkers. As long as we remain united in solidarity, we will keep U.S. Steel U.S.-owned.”
