U.S. Steel and Nippon Steel allege in a lawsuit President Joe Biden blocked their $14.9 billion merger over political calculations, calling it an unprecedented action that “served the president’s personal political agenda.”
The steelmakers filed a lawsuit in the U.S. Court of Appeals in the District of Columbia against the Committee on Foreign Investment in the United States, President Joe Biden, Secretary of the Treasury Janet Yellen and Attorney General Merrick Garland. They are asking the court to vacate the president’s decision to halt the deal on national security grounds, alleging the CFIUS review was “a charade” and “a sham designed to arrive at a predetermined outcome.”
“For the first time in history, actions by the President and by the Committee on Foreign Investment in the United States have blocked the acquisition of an American company by a foreign company based in Japan, a nation that is one of the United States’ closest allies,” the lawsuit says.
The plaintiffs allege the president and CFIUS corrupted national security reviews to pursue a political agenda. They pointed to prior statements the president made about blocking the deal, including that he meant it when he told steelworkers he had “their backs.” It contends he made up his mind before the review was completed and he had all the facts about the case.
“The president publicly reaffirmed that decision three separate times before receiving CFIUS’s analysis — leaving no doubt that his decision was predetermined and that the statutory national security review ‘process’ was a sham,” the steelmakers said in the lawsuit. “The president’s decision had nothing to do with national security: how could it when the national security evaluation had not even started?”
The administration contended that turning over one of the last two integrated steelmakers left in the United States to foreign ownership would jeopardize national security by putting domestic steel production at risk when it could be needed in the event of war. The federal government has used the same rationale for years to impose the Section 232 tariffs, which survived several court challenges during the past two administrations.
The lawsuit alleges United Steelworkers International President David McCall pressured Biden to block the deal because he backed Cleveland-Cliffs’ bid to buy U.S. Steel. Cleveland-Cliffs made an unsolicited bid to buy U.S. Steel for $35 a share, which the Pittsburgh-based steelmaker rejected before putting itself on the open market, getting a bid of $55 a share from Nippon Steel.
Biden sought to stop the deal to gain support from steelworkers in the swing state of Pennsylvania during his reelection campaign, the plaintiffs allege. They contend he promised to keep U.S. Steel an American company in exchange for the USW’s endorsement, which he received.
“Because the President had made his decision in March, CFIUS deviated dramatically from its usual review procedures, employing a Potemkin process designed and conducted to support the president’s predetermined result of blocking the merger,” the lawsuit alleges. “CFIUS did not engage in the bona fide investigation of potential national security risks—and negotiation of mitigation measures if risks are identified — that the statute expressly requires.”
Nippon Steel said it has operated in the United States for decades and employs thousands of workers in America, including hundreds represented by the USW. It noted it first established its North American operations in 1972 and is publicly traded with shareholders in Japan, America and Europe. It said it will invest up to $18 billion to protect and grow U.S. Steel’s operations in the United States, where it would remain headquartered in Pittsburgh and governed by a board with a majority of U.S. citizen directors.
The Tokyo-based steelmaker promised it would ensure U.S. citizens held key management positions, that it would not interfere with U.S. Steel’s decision on trade matters, that it would agree to monitoring by the federal government and that it would invest in U.S. Steel’s production capacity in a way that would not occur otherwise.
It alleges that the Committee for Foreign Investment in the United States did not articulate any national security concerns or specify how to mitigate them for months into the review.
“Never before has a president prohibited an acquisition by a company based in Japan, one of our closest allies. Nor, for that matter, has a president ever prohibited the acquisition of a U.S. company when the company is not a core supplier to the defense industrial base, not an owner or operator of critical infrastructure, not a developer of sensitive technology that is controlled for transfer to a country of concern, not proximate to a sensitive military installation and not a collector of any sensitive data of Americans. Indeed, as the CFIUS record makes clear, the acquisition of U. S. Steel by Nippon Steel would improve national security by enhancing and expanding domestic manufacturing and technological capabilities, preserve jobs in America and enhance U.S. competitiveness. But none of that mattered,” the steelmakers said in their lawsuit. “Instead, the president’s motivation was clear: politics. CFIUS’s and the president’s actions are unconstitutional, unlawful and they should be set aside.”
Nippon Steel and U.S. Steel allege they never received due process, equal protection under the law or a fair and impartial process as Biden said he would block the deal back in March and later carried through on the promise. They argued there was no credible evidence of a national security risk that could not be addressed through other federal laws.
“The U. S. Steel of today is a far cry from the U. S. Steel of its founder, Andrew Carnegie. Its employment was greatest in 1943 and its production peaked in 1953. U. S. Steel was dropped from the Dow Jones Industrial Average in 1991 and from the S&P 500 in 2014. For a long time, the company has not produced the steel used in building America’s infrastructure or military equipment. Its largest market is for automotive steel,” the steelmakers said in the lawsuit. “U. S. Steel is not a defense supplier. It does not supply products to the U.S. military, and its manufacturing technologies and processes are not designed specifically to produce steel for military applications. Nor does U. S. Steel have any products, capability or know-how that are specific to, or customized for, U.S. government applications, including U.S. military applications. For example, it does not produce, and does not have the capabilities to produce steel plate at the thickness needed for armor plating or ships.”
U.S. Steel would benefit greatly from Nippon Steel’s ownership, capital investment and technology sharing, the steelmakers argued.
“Prior to 2021, U. S. Steel had been losing money every year for 10 years. In 2019, it started cutting costs, idling older facilities and investing in new technologies. Substantial additional investment is needed to make U. S. Steel’s blast furnace facilities competitive. As part of the proposed merger, Nippon Steel has pledged to invest no less than $2.7 billion in U. S. Steel’s United Steelworkers-staffed facilities, including those in Pennsylvania and Indiana,” the steelmakers said in the lawsuit. “That investment is essential for U. S. Steel to remain economically competitive and to keep workers employed in the domestic production of steel. U. S. Steel would not be able to make that investment on its own if the merger is blocked and could be forced to close U.S. facilities and significantly reduce its domestic steel production capacity.”
Nippon Steel argued it is not controlled by the Japanese government and its 10 largest stockholders included U.S.-based funds like State Street and JPMorgan.
“Nippon Steel Corporation has worked closely with U.S. companies for over 70 years. For example, Nippon Steel Corporation has developed and maintained close relationships with the coal industry since it first began purchasing metallurgical coal from U.S. companies in the 1950s. It also has invested heavily in the United States for the past four decades. It currently has stakes in 28 subsidiaries and affiliates in the United States, including Nippon Steel North America,” the steelmakers said in the lawsuit.
Nippon Steel North America is headquartered in Houston. Its operations include Standard Steel in Pennsylvania, Wheeling-Nippon Steel in West Virginia, International Crankshaft in Kentucky and AM/NS Calvert in Alabama. It said it would divest from the Alabama mill it jointly owns with ArcelorMittal at a substantial loss to address any antitrust concerns that could come up. It said it has a history of expanding operations at U.S. plants, like Wheeling-Nippon Steel, and saw U.S. Steel as another growth opportunity.
“For much of the 2010s, U. S. Steel faced challenges due to high steelmaking costs and low steel prices. Around 2020, U. S. Steel began to invest in higher-value products and newer technologies. Despite those significant capital investments, U.S. Steel’s stock price did not reflect its performance, even though its returns improved in 2021 and 2022. As a result of U. S. Steel’s relatively strong financial performance and comparatively low stock price, it became an attractive merger target,” the steelmakers said in a lawsuit.
After getting an unsolicited bid from Cleveland-Cliffs, U.S. Steel reached out to more than 50 potential buyers, including Nippon Steel.
“The board concluded that Nippon Steel’s purchase of U. S. Steel would provide the company with a long-term partner that will protect and grow existing operations,” the steelmakers said in the lawsuit. “It determined that Nippon Steel’s bid was superior to alternative bids that were riskier and likely would result in cost-reduction strategies such as layoffs and divested facilities. And it found that Nippon Steel’s bid would deliver significantly more value and certainty to U. S. Steel stockholders than other bids, including Cliffs’ bid.”
___
(c) 2025 The Times
Distributed by Tribune Content Agency, LLC.
