Peter Mihalick: Despite noise from politicians steel deal is good for Pittsburgh
Watching from afar, it is sad that the politics of the D.C. swamp have infected Pittsburgh. That’s the only way to explain why politicians and special interests from outside Pennsylvania are working so hard to block the Nippon Steel – U.S. Steel deal, which objectively would be good for the region and ensure the viability of the historic steel industry which defines western Pennsylvania.
The deal is a no-brainer for every stakeholder involved. It makes sense for the company. It makes sense for the workers. It makes sense for the community and the state. National politicians looking for votes want to fearmonger about foreign ownership, but with a significant cost to the workers and the ancillary secondary support businesses and suppliers. The politics of the presidential and control of Congress should not be on the backs of the people who will suffer the most if this deal is blocked.
If the Biden Administration successfully blocked the deal, jobs will be lost. The Wall Street Journal reported on September 4, 2024, “U.S. Steel’s chief executive said the company would close steel mills and likely move its headquarters out of Pittsburgh if its planned sale to Nippon Steel collapses.” The actual workers who are represented by the United Steelworkers rallied recently to support the deal and that according to U.S. Steel accounts in Pennsylvania for “$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.” These facts have not yet moved the leadership of the United Steelworkers to not oppose, despite the harm it causes to its own membership.
Democratic nominee for President Kamala Harris was in Pittsburgh on Labor Day and said, “U.S. Steel should remain American-owned and American-operated, and I will always have the backs of America’s steelworkers.” The problem is the Nippon offer will help Pennsylvania steelworkers because it keeps the plants operating and promises upgrades to keep them viable and modernized to meet the future demands of steel in the United States. The Trump campaign also signaled opposition to the deal. Both campaigns overlook that the leadership of the union may be talking tough to leverage a better deal and politicians ought to know not to get locked in against a moving target.
However, this shortsightedness overlooks the reality of steel production in the United States and the inability of domestic manufacturers to compete with older mills and outdated manufacturing processes. The Nippon deal interjects fresh new capital and ensures a better positioned US Steel — which ought to be the goal of the political class, no matter which party is in charge in November.
Right before an election is the time for politicians to act tough and make news to generate unearned media. The Pittsburgh Post-Gazette was spot on to point out that “opposition to the Nippon sounds like a bold defense of American industry and workers, but it will only hurt the people — and the region — it’s meant to support.” If politicians are successful in putting politics before good policy, blocking the deal will be “the greatest self-inflicted economic wounds in Western Pennsylvania’s history.”
As somebody who grew up in western Pennsylvania, I fear for the future of my state if steel production flees the state, and potentially the nation, and Americans become even more dependent on steel imported from China. Nippon is throwing US Steel a lifeline and it would be foolish not to take it.
Peter Mihalick is former legislative director and counsel for former Reps. Barbara Comstock (R-VA) and Rodney Blum (R-IA)
How much was Peter Mihalick paid to write articles such as these? Are there other buyers? Glossing over obvious national security interests is not objective at all. Nippon is Japanese for Japan. Japan steel is trying to offer a premium price so they can compete with U.S. tariffs. They offer promises – with no guarantees – because even they are honest enough to admit to the obvious national security concerns this transaction would create for the United States. Unfortunately, Peter Mihalick is either not being honest or can’t see his cognitive bias regarding this issue. Another solution that is obvious is the United States could finance as ESOP purchase for the U.S. Steel employees.
Years ago, ESOP was to be the Saviour of National Steel and the new prosperity for West Virginia. Where is it now? Having government prop up an industry, especially steel, is a loser, I point out as an example post WWII British Steel. Government has financed business endeavors all over the landscape and generally the taxpayers end up eating big losses. Look at Solyndra, Obama’s grand solar enterprise that ended with a 500M loss. Does anyone remember the early 1980s? The collapse of the banking industry. a consequence of the funny money economy going at the time supported by an energy crisis. The Savings and Loan financial structure died permanently. I want to point out now the fact that Mittle Steel (a European company) picked over the bones of our domestic steel industry, having been opposed in the purchase of going economic activities, and got Bethlehem Steel’s rail making mills, as a sort of consolation prize. In my view, government bailout money will not be spent wisely, and the U.S. Steel remains will be saddled with huge purchase debt and an enormous financial requirement needed to modernize. Such great ministrations of money mean the taxpayer will never be able to get paid back and ultimately eat a big loss.
George,
Good examples. Here is another one: As of September 30, 2023, the total amount disbursed for TARP programs was $443.5 billion and OFS collected $425.5 billion (or $443.1 billion if including the $17.5 billion in proceeds from the additional Treasury American International Group, Inc. [AIG] shares) through repayments, sales, dividends, interest, and other income. After considering the interest expense of $13.1 billion, the net cost of TARP programs was $31.1 billion. TARP helped stabilize the U.S. financial system, restart economic growth, and prevent avoidable foreclosures.
Nippon Steel’s proposed $14.9 billion takeover of U.S. Steel would create national security risks because it could hurt the supply of steel needed for critical transportation, construction, agriculture projects, and military goals. If we lose control and ability to produce high-quality steel, we are doomed.
I cannot find a follow up article to this one. You are clearly very bright, can you suggest further reading ? Many thanks!
It is my view the nation security concerns can be met rather easily. Our country has a history of seizing assets of unfriendly actors. If at any time, it begins to appear that Japan is becoming “unfriendly and hostile” (a very unlikely event) we just install our own management into plant operations. At this point in time, we are so bound up with foreign ownership/management that production of military equipment is compromised. Beretta, Glock for small arms, BAE Systems producing sophisticated armoured vehicles dependent on computer chips from foreign sources, and so it goes. In solar technology we are almost 100% dependent on materials from unfriendly foreign sources. Our self-sufficient ship sailed and we are going to half to row like crazy to get it back in harbour.