U.S. Steel CEO ‘extraordinarily confident' Nippon deal will close despite political scrutiny

U.S. Steel Corp. CEO David Burritt expressed confidence in the potential acquisition of the storied American company by Japanese steelmaker Nippon Steel despite political and union opposition.

The proposed $14.9 billion takeover of U.S. Steel by Nippon should clear antitrust regulations and will help make the U.S. more competitive with steelmaking giants in China, Burritt said at a Sept. 17 Detroit Economic Club event.

Under the deal, which would create the world's third-largest steel producer by volume, behind China Baowu Steel Group and ArcelorMittal, Nippon would make bigger investments in domestic operations than U.S. Steel could make alone, he said.

"Bringing Nippon's expertise with U.S. Steel's footprint here in the United States, that gives us an opportunity to really compete with China," Burritt said. "That's why our customers love this. The auto guys love this transaction very much."

Burritt's comments come at a critical moment for Nippon and U.S. Steel, a major supplier of steel to the North American auto industry, as the proposal comes under intense political scrutiny. President Joe Biden has signaled opposition and was reported this month to be preparing to block the deal.

But the Washington Post, citing three sources with knowledge of the matter, reported Sept. 13 that Biden is not imminently expected to block Nippon's bid as the White House comes under pressure from business groups concerned it is putting politics ahead of economic interests.

Despite the political pressure, Burritt is "extraordinarily confident" the deal will close. Nippon will ensure that antitrust concerns are addressed, he said, and the deal will expand U.S. Steel's business with Nippon's expertise in blast furnaces.

"I know it's getting serious scrutiny," he said. "That is fantastic for us because this deal will close on its merits. I'm very confident in that."

Nippon is committed to investing in U.S. Steel's footprint, Burritt said, citing a pledge from the company to invest around $2.7 billion in the U.S. That figure includes $1 billion to increase the capacity for high-grade steel at a facility in Pennsylvania and $300 million to extend production at a blast furnace site in Indiana.

"These are things we would really like to do, but we don't have the funds or the financing to be able to do that, and they do," he said.

The auto industry would be "huge beneficiaries" from Nippon's U.S. investments, Burritt said. The takeover would help U.S. Steel's facilities become more competitive in advanced high-strength steel and lightweight steel, crucial components for automakers and suppliers as they look to make vehicles safer and more efficient.

"It's no wonder we get so many comments from folks in the auto industry asking when we're going to get this thing done," he said.

Still, U.S. Steel and Nippon have a steep hill to climb. While the pace of deliberations at the White House has slowed, Biden remains opposed to the deal, the Washington Post reported. A White House spokesperson told the newspaper that Biden is waiting for a recommendation from an interagency review board before taking action.

Meanwhile, Vice President Kamala Harris, the Democratic nominee, and former President Donald Trump, the Republican nominee, have both signaled their opposition to the deal ahead of the November election. U.S. Steel is based in Pennsylvania, a crucial battleground state, and both candidates are vying for support from steelworkers concerned about a foreign company taking over a legendary American industrial giant.

The Committee on Foreign Investment in the United States, which has been reviewing the deal, appeared poised to block it Aug. 31, when it sent the companies a 17-page letter, Reuters reported. The letter alleged that the transaction posed a risk to national security by threatening the steel supply chain for critical U.S. industries.

The companies countered in a 100-page letter that the deal would enhance U.S. national security by allowing a company from an allied nation to make a much-needed investment in a struggling U.S. firm in a critical sector, according to another Reuters report.

As U.S. Steel and Nippon plead their case to the White House, business groups including the Alliance for Automotive Innovation and Autos Drive America made their own in a Sept. 11 letter to Treasury Secretary Janet Yellen. The letter, also signed by the U.S. Chamber of Commerce and the Global Business Alliance among other groups, expressed worry the review process for the proposed acquisition is "being used to further political agendas" outside of the purview of the foreign investment committee.

"Unfortunately, there have been persistent attempts recently to politicize the committee's work from across the political spectrum, allowing politics to undermine the clear and narrow statutory mandate of national security," the letter reads. "We fear this political pressure may be unduly influencing the outcome of the [committee's] review. Indeed, America's investment climate will be severely tarnished if such political interference prevails."

A potential acquisition by the Japanese steelmaker is seen as more palatable for the auto industry than a takeover by Cleveland-Cliffs, which previously bid for U.S. Steel.

The Alliance for Automotive Innovation earlier this year wrote a letter to President Joe Biden's chief economic officer warning against allowing Cleveland-Cliffs to acquire U.S. Steel if the Nippon deal falls through, saying the combined company would control 65 to 90 percent of steel used in vehicles and would lead to uncompetitive prices.

Automakers also voiced concern that a combined Cleveland-Cliffs-U.S. Steel would  move the vast majority of U.S. production of electrical steel, a niche product that's critical for electric motors, under one roof.

"With Nippon Steel, they are far more experienced" on electrical steel, Burritt said. "Their know-how, their knowledge will come to us and we'll be able to move faster and help develop that for our customers sooner than we would have been able to otherwise."

Companies also see the bid as a chance for Nippon to introduce more technologically advanced steelmaking in the U.S.

"The beauty of this is all this money coming to the United States and U.S. Steel to make us more competitive — that is investment in innovation," Burritt said. "They are experts in innovation in the blast furnace."

Reuters contributed to this report.