Why US Steel, Nippon Steel have sued the US government
What's the story
US Steel and Nippon Steel have sued the US government for blocking a $14.9 billion acquisition of the American steel manufacturer by its Japanese counterpart. The suit was filed in US Court of Appeals for the District of Columbia Circuit today. It seeks to overturn the Committee on Foreign Investment in the United States (CFIUS) review process and President Joe Biden's order, alleging, "violation of constitutional guarantee of due process and statutory procedural requirements, as well as unlawful political influence."
Additional litigation
Second lawsuit targets Cleveland-Cliffs and USW union
Along with the action against Biden, both steel companies have also filed a separate lawsuit. This suit is aimed at Cleveland-Cliffs, its CEO Lourenco Goncalves, and United Steelworkers union President David McCall. The companies accuse them of "illegal and coordinated actions" designed to sabotage the deal.
Deal disruption
Biden's national security concerns halt acquisition
President Biden's intervention last week, citing national security concerns, may have derailed the contentious acquisition plan after a year-long review. Nippon Steel had outbid rivals including Cleveland-Cliffs, ArcelorMittal, and Nucor in a December 2023 auction to secure this deal. The move was viewed as a strategic bet on Biden's infrastructure spending bill.
Deal opposition
Political and union opposition intensify
Notably, the acquisition has been met with growing resistance from political and union camps in recent months. Both Biden and President-elect Donald Trump, who is set to take office later this month, have voiced their opposition to the deal. The White House had demanded a thorough review of the deal considering US Steel's importance in making material critical to national security.
Security risk
Biden administration warns Nippon Steel of security risk
The Biden administration had earlier warned Nippon Steel that the acquisition could be a national security threat by harming the American steel industry. This was revealed in a letter to the Japanese company, Reuters reported in September 2024. The CFIUS, which was assigned to review the deal, failed to reach an agreement prompting Biden to block the acquisition.
Economic impact
US Steel warns of job losses and mill closures
US Steel has warned that if the deal falls through, it could lead to massive job losses for US union workers and the closure of several steel mills. The company has also hinted at potentially moving its headquarters out of Pennsylvania. US Steel shareholders overwhelmingly approved the acquisition in a vote in April last year.
Proposed solutions
Nippon Steel proposes measures to address concerns
In a bid to quell fears over the acquisition, Nippon Steel has offered to shift its US headquarters to Pittsburgh, the home of US Steel. The Japanese company also promised to respect all current agreements between US Steel and the USW. However, despite the efforts, investor fears over the deal's timeline have weighed on US Steel's stock performance.