U.S. Steel's CEO, David Burritt, has raised alarms about the future of the company if its planned sale to Nippon Steel fails. According to a report from the Wall Street Journal, Burritt warned that the company might need to shut down steel mills and consider moving its headquarters out of Pittsburgh if the $14.1 billion acquisition does not go through.

The Importance of Nippon Steel's Investment

Burritt, who has led U.S. Steel  since 2017 stressed that Nippon Steel’s proposed investment of nearly $3 billion is crucial for modernizing U.S. Steel’s outdated mills. This financial boost is seen as essential for maintaining the competitiveness of these facilities and safeguarding jobs. Burritt candidly admitted, “We wouldn’t be able to proceed without this deal,” highlighting the financial constraints the company faces.

Political and Labor Opposition

The potential sale has encountered significant resistance from various quarters. Democratic presidential nominee Kamala Harris has voiced concerns about U.S. Steel remaining under domestic ownership, which adds another layer of complication to the acquisition. Although Harris has not explicitly stated that she would block the transaction, her comments are perceived as a potential obstacle if the deal's regulatory review extends beyond the current administration. President Biden, along with Republican nominee Donald Trump and several members of Congress, has also expressed skepticism about the deal. Additionally, the United Steelworkers union is challenging the acquisition, further complicating the situation.

 

Impact on U.S. Steel’s Stock and Internal Actions

U.S. Steel’s stock price dropped by 6% on Tuesday, closing at $35.60, reflecting investor anxiety about the deal's uncertain outcome. In response, U.S. Steel plans to mobilize its employees on Wednesday at its Pittsburgh headquarters to advocate for the benefits of the Nippon Steel acquisition. The company has been actively working to garner support from elected officials and union leaders, but opposition remains strong.

 

Nippon Steel’s Commitment and Challenges

Nippon Steel, ranked as the world’s fourth-largest steel producer by output, recently increased its investment commitment to $2.7 billion for upgrading U.S. Steel’s mills. The Japanese steel giant has also pledged to prevent layoffs of hourly workers until 2026. This commitment is aimed at addressing U.S. Steel’s ongoing financial difficulties, which include a decade of losses leading up to 2020 due to escalating costs and low steel prices. The company had previously delayed necessary maintenance and upgrades in an effort to cut costs and manage financial losses.

 

Potential Relocation and Future Plans

Burritt has indicated that if the deal falls through, U.S. Steel might have to close its Mon Valley operation, the last remaining steel mill in Pittsburgh. This potential closure would likely prompt the company to shift its production focus to the South, which could lead to relocating its headquarters to that region. Burritt noted, “If that mill can’t survive into the next decade, there’s little reason for us to remain in Pittsburgh.”

 

Conclusion

Nippon Steel’s offer of $55 per share outpaced Cleveland-Cliffs’ cash-and-stock proposal, and U.S. Steel’s shareholders approved the Nippon Steel deal earlier this year. However, the acquisition’s path forward remains fraught with political, labor, and financial hurdles. As U.S. Steel grapples with these challenges, the future of its mills, workforce, and headquarters hangs in the balance.