Business Minds

President Joe Biden, Vice President Kamala Harris, former President Donald Trump and his running mate JD Vance disagree on a lot. But there’s at least one thing they’re all united on: opposition to the proposed merger between Japan’s Nippon Steel and the iconic American steelmaker U.S. Steel.But that might not be enough to kill the deal.Harris joined the bipartisan crowd’s opposition in a Labor Day speech to a group that included members of the United Steelworkers union, which strongly opposes the merger.”US Steel is a historic American company, and it is vital for our nation to maintain strong American steel companies,” Harris said in Pittsburgh Monday. Last month, Trump said at a Pennsylvania rally that “I will stop Japan from buying United States Steel. They shouldn’t be allowed to buy it.”Normally, that bipartisan political opposition would end a deal’s chance of survival. Such a purchase needs the approval of the Justice Department’s antitrust division and the Committee on Foreign Investment in the United States (CFIUS). And CFIUS is hardly an independent body it is made up of members of the president’s Cabinet. In addition, the Biden administration’s Justice Department has been far more reluctant to give antitrust approval to proposed mergers, blocking some high-profile deals, such as the proposed purchase of Spirt Airlines by JetBlue.But there’s reason to think that the deal could yet win approval not only from regulators but also from the union now firmly opposed to the deal although experts who believe that could happen say it wouldn’t occur until after the election.The union, for example, is using its current political leverage to get the best possible deal from Nippon and U.S. Steel, including even stronger promises to keep U.S. Steel’s mills that employ union members open and financial protections for anyone who does lose a job, said Philip Gibbs, a steel analyst for KeyBanc.”This might be the best possible deal for U.S. Steel,” Gibbs said. “If a change in ownership is perhaps inevitable, if all roads lead to attrition, why not try to maximize the safety nets in writing. They want to make sure their families are taken care of.”‘The perception of the state itself’The proposed purchase was bound to be unpopular. U.S. Steel was once a symbol of American industrial might. It was the most valuable company in the world and the first to be worth $1 billion soon after its creation in 1901. It was also crucial to the U.S. economy and the cars, appliances, bridges and skyscrapers that tangibly indicated that strength. Decades of decline later, it is no longer even the largest U.S. steelmaker, and a relatively minor employer.But it is still not a company that politicians who enjoy talking about the American greatness want to see fall into foreign hands.There are relatively few steelworkers still working for the company in the crucial electoral battleground state of Pennsylvania. U.S. Steel says it has more than 3,000 employees in the state in its remaining steel mills along the Monongahela River just outside of Pittsburgh. But the company has tens of thousands of retirees still in the state, and many more voters whose parents, grandparents or even great-grandparents may have worked in its mills. It makes the idea of a Japanese purchase of the once powerful U.S. company a politically fraught move, said Gibbs.”You’re not just talking about the perception of the steelworkers, it’s the perception of the state itself,” said Gibbs. “As a politician you have to say you’re not going to stand by and let the deal happen.”But both Nippon Steel and U.S. Steel say they remain committed to pursuing the deal, arguing that it is in the best interest of shareholders, U.S. Steel employees and customers.”US Steel will be a much stronger company as a result of the transaction with Nippon Steel, and the American steel industry will be more globally competitive,” U.S. Steel said in a statement. “Nippon Steel has committed to investing nearly $3 billion in our union-represented facilities. These investments would be truly transformative, securing jobs for generations of steelmakers in western Pennsylvania and represent an influx of capital that US Steel simply would not pursue absent the transaction with Nippon.”U.S. Steel and Nippon both argue that deal will the U.S. Steel’s mills that employ the USW members will be far more globally competitive in a steel industry now dominated by foreign producers, such as those in China. Nippon’s said in a statement it still believes it can win approval for the deal.”We believe that a fair and objective regulatory review process will support this outcome, and we look forward to closing the transaction as soon as possible,” it said.To try to assure its U.S. critics, Nippon Steel issued a statement Wednesday promising that U.S. Steel would continue to have a board of directors made up mostly of American citizens, and that Americans would also be a majority of management at the company. It also said there would be no transfer of any of U.S. Steel’s production capacity or jobs outside the United States.Why the union doesn’t like the dealThe union is concerned that Nippon is more interested in U.S. Steel’s nonunion plants that use electric furnaces to make steel by melting scrap, rather than in the unionized mills, known as integrated steel mills, that still make steel from its raw materials, such as iron ore.”Nippon has shown through their own actions that they’re changing the way they operate in Japan,” Gibbs said about the shift from integrated mills to electric furnaces there.The union says it doesn’t believe in the promises made by Nippon Steel so far and that it remains opposed to the purchase.”Nippon still has not provided any true guarantees that our jobs, wages or benefits will be protected beyond the expiration of our current agreements in 2026,” said a union statement last month. It did not answer a question from CNN asking if it is still talking with Nippon and US Steel about dropping opposition to the deal.If the union does drop its opposition, it becomes much easier for politicians to allow it go through, Gibbs said, even if they would likely want to wait until after the election.CFIUS is supposed to look into the national security implications of deals, and many of the politicians who have come out opposed to the deal claim it would be a threat to the nation’s long-term economic health. A number of experts argue that doesn’t hold up to scrutiny.”Given the U.S.-Japanese alliance, Nippon Steel’s record, and the U.S. Steel existing weaknesses, it is difficult if not impossible to identify a national security risk that justifies opposing the merger,” said Michael Leiter, head of Skadden’s CFIUS and National Security Practices. “It is much, much easier, however, to identify a political risk, and regrettably that calculus is dominating the issue.” CNN’s Matt Egan contributed to this report