The $14.9 Billion Nippon-U.S. Steel Deal Falls Apart, But Exposes A Rival CEO’s “Cookie Jar” Moment. Doubts, Influence, And What Really Happened

What happens when business rivalries collide with political agendas? The $14.9 billion Nippon-U.S. Steel, once set to be a transformative deal in the steel industry, has unraveled. But the drama didn’t end there—it also exposed the behind-the-scenes machinations of Cleveland-Cliffs’ CEO Lourenco Goncalves, whose strategic comments to investors may have played a role in the deal’s downfall.

The Rivalry in the Spotlight

President Joe Biden’s decision to block Nippon Steel’s takeover of U.S. Steel was officially framed as protecting American jobs and national security. However, documents and investor call summaries suggest another subplot—Goncalves’ active campaign to undermine the Nippon bid.

According to a Dec. 17 letter submitted to the Committee on Foreign Investment in the U.S. (CFIUS), Goncalves made at least nine calls to investors, repeatedly casting doubt on the deal.

In a March 13 call hosted by JP Morgan, he confidently declared, that while he could not force U.S. Steel to be sold to him, he could however work his magic further stating that – the deal hasn’t closed and Biden hasn’t said anything about it yet, but he will. True to his prediction, Biden announced his opposition the very next day.

While Goncalves publicly voiced similar concerns on three earnings calls this year, his private remarks reportedly coincided with fluctuations in U.S. Steel’s share price—an intriguing detail noted by Nippon and U.S. Steel in their complaint to CFIUS.

Why Did Biden Block the Deal?

On Friday, President Biden officially blocked Nippon Steel’s bid after federal regulators failed to reach consensus on whether the merger posed national security risks. Biden stated a strong domestically owned and operated steel industry represents an essential national security priority... Without domestic steel production and domestic steel workers, our nation is less strong and less secure.

Nippon’s proposal had included a $2.7 billion investment in U.S. Steel’s aging facilities in Gary, Indiana, and Pennsylvania’s Mon Valley, along with a decade-long commitment to maintain production capacity in the U.S. But even these assurances weren’t enough to sway CFIUS or the administration.

The Fallout and Legal Battle Ahead. Nippon Steel

Nippon Steel and U.S. Steel have called Biden’s decision “a clear violation of due process and the law” and hinted at a lawsuit to salvage their deal. Their joint statement read, “We are left with no choice but to take all appropriate action to protect our legal rights.’’

Cleveland-Cliffs’ Ambitions and Rejections

Cleveland-Cliffs, under Goncalves’ leadership for over a decade, has consistently pursued U.S. Steel. Backed by the United Steelworkers union, the company’s unsolicited $7 billion bid in August 2023 promised to create a “lower-cost, more innovative, and stronger domestic supplier.”

However, U.S. Steel’s board rejected the offer, citing antitrust concerns.

A Cleveland-Cliffs takeover would have consolidated up to 95% of U.S. iron ore production and dominated steel supply for automakers—a potential red flag for regulators.

In contrast, Nippon Steel’s December all-cash offer, valued at twice Cleveland-Cliffs’ bid, promised a significant investment in U.S. Steel’s aging mills and long-term commitments to U.S. production and jobs.

But the Nippon offer became entangled in politics. Both President Joe Biden and Republican President-Elect Donald Trump opposed the deal, with Biden emphasizing national security and Trump asserting the company should remain American-owned.

The Politicization of the Deal

The Nippon bid found itself at the crossroads of political posturing and union pressure. The United Steelworkers union, led by President David McCall, opposed the deal and lobbied Biden to block it. Biden’s objections, according to Nippon and U.S. Steel, were a result of “impermissible undue influence” from the White House on the CFIUS review.

In a letter to CFIUS, Nippon and U.S. Steel accused Goncalves of exploiting this politicization to his advantage. In a March 15 investor call, Goncalves dismissed the CFIUS review as mere “cover” for a presidential decision, saying, “CFIUS is a bunch of bureaucrats… It means the President can do whatever he wants.”

Steelworkers Divided

While the United Steelworkers’ national leadership celebrated Biden’s decision, dissent emerged from within. Jason Zugai, a steelworker and union vice president at U.S. Steel’s Mon Valley plant, expressed frustration stating that Nippon Steel were going to invest in the Valley and had committed to 10 years of no layoffs. But now they won’t have those commitments from anybody.

Zugai and other Mon Valley steelworkers supported the Nippon deal, viewing it as a lifeline for aging mills and job security. Their concerns are echoed by Wall Street analysts like Gordon Johnson, who called the decision “a disaster for Pennsylvania… This is not in the interest of the workers or the shareholders of U.S. Steel.’’

Founded in 1901 through a merger orchestrated by J.P. Morgan and Andrew Carnegie, U.S. Steel became an industrial juggernaut and a symbol of American economic dominance. At its peak during World War II, the company employed 340,000 workers, fueling the nation’s war effort and economic growth. Yet, over the decades, U.S. Steel’s prominence has waned under the weight of foreign competition, political entanglements, and evolving global markets.

The Rise and Fall of an Industrial Icon

In its early years, U.S. Steel represented the pinnacle of American manufacturing might. By 1943, the company’s workforce of 340,000 symbolized a nation’s unyielding industrial power. However, the tides began to shift in the latter half of the 20th century.

Foreign competition, particularly from Japan in the 1970s and 1980s and later from China, eroded U.S. Steel’s dominance. These global players introduced cheaper, more efficient steel production methods, forcing U.S. Steel to shutter plants and lay off workers. Today, the company employs fewer than 22,000 people in an industry now dominated by China, which accounts for a staggering share of global steel production.

Government Interventions. A Lifeline or a Crutch?

Successive U.S. administrations have sought to protect domestic steelmakers through tariffs and trade barriers. In 2018, then-President Donald Trump imposed a 25% tariff on foreign steel, a policy maintained by President Joe Biden, albeit with some modifications into import quotas. These measures have kept American steel prices artificially high, providing U.S. Steel with a financial cushion.

While these policies have helped U.S. Steel remain profitable—boasting $1.8 billion in cash as of late 2024, though down from $2.9 billion at the end of 2023—they have also drawn criticism for fostering complacency and discouraging innovation in the domestic steel industry.

Union Confidence vs. Corporate Warnings

United Steelworkers President David McCall struck an optimistic tone, declaring U.S. Steel capable of remaining “a strong and resilient company” without external capital. However, U.S. Steel management paints a more precarious picture.

The company has warned that without Nippon’s investment, it may pivot away from its traditional blast furnaces in Pennsylvania and Indiana, jeopardizing thousands of well-paying union jobs and potentially forcing a relocation of its Pittsburgh headquarters.

The bets are high for unionized workers and the communities that depend on these facilities. Pennsylvania Governor Josh Shapiro spoke of the importance of preserving local jobs and investments, cautioning U.S. Steel against using its workforce as leverage and urging future bidders to match Nippon Steel’s commitments to employment and capital expenditure.

A Strategic Shift Toward Electric Arc Furnaces

U.S. Steel’s strategy appears to be evolving in response to industry trends and economic realities. The company has been leaning toward newer electric arc furnaces, such as its Big River Steel plant in Arkansas, which are more efficient, environmentally friendly, and cost-effective than traditional blast furnaces.

Steel analyst Josh Spoores spoke about the shift, noting that no steelmaker has built a blast furnace in North America for decades. Instead, companies are focusing on electric arc technology, which aligns with market demands for high-quality steel at competitive prices.

While this pivot may secure U.S. Steel’s profitability in the long term, it raises questions about the future of its legacy operations and the union jobs tied to them.

The Prospect of a New Bidder

The failed Nippon deal has reignited speculation about potential suitors for U.S. Steel. Cleveland-Cliffs, an arch-rival, previously made a $7 billion bid in 2023, which U.S. Steel rejected. Analysts suggest Cleveland-Cliffs could return with a renewed offer, potentially benefiting from the current uncertainty surrounding the company.

Governor Shapiro has made it clear that any future bidder must prioritize job protection and capital investment, echoing the commitments Nippon Steel had pledged.

The Last Bit

As the dust settles, U.S. Steel’s future remains uncertain. Without Nippon’s promised investments and commitments, the company’s aging infrastructure and competitive position could deteriorate.

Ironically, Biden’s move to safeguard American jobs may have jeopardized them instead. Nippon’s proposed investments could have revitalized U.S. Steel’s aging infrastructure, securing jobs and boosting competitiveness. Instead, the company now faces an uncertain future.

Trump, never one to shy away from bold proclamations, reiterated his opposition on his Truth Social platform: “I will block this deal from happening. Buyer Beware!!!”

Meanwhile, Goncalves’ aggressive tactics illustrate the lengths to which corporate leaders will go to tilt the playing field. Whether his strategy was fair play or overreach remains a topic for debate.