A bidding war between steelmakers for American manufacturing icon U.S. Steel could have massive implications for the auto industry — especially if Cleveland-Cliffs wins out, analysts said.
The Ohio company, the largest supplier of automotive steel in the U.S., rattled the manufacturing world on Sunday when it went public with a $7.25 billion offer to acquire U.S. Steel, its longtime rival. U.S. Steel rejected the deal, and instead began a review of its strategic options.
"I can guarantee you all the auto executives that were on the golf courses or at church or hanging with their families at picnics or baseball games all saw that at the same time, and their blood pressure went through the roof," said Philip Gibbs, an analyst with KeyBanc Capital Markets Inc.
That's because such a takeover would give Cleveland-Cliffs a dominance in huge swaths of the domestic market for many automotive steel products. The combined entity would have control of "well over 50 percent of the exposed auto market," Gibbs said, likely drawing the ire of automakers, whose leverage for price negotiations for steel would decrease.