Final Thoughts

SMU has tried to remain neutral on the matter over the past year. But to be honest, I thought Nippon was a good deal for U.S. Steel. Maybe the only one after Cleveland-Cliffs acquired Stelco.

Next steps

I mostly agree with Lewis Leibowitz’s take on the situation here. The mostly likely next step: The lawsuits cometh. Perhaps they’ll drag on for years.

USW President David McCall is right that U.S. Steel can be competitive on its own. But it’s not clear to me where the investment needed for the company’s union-represented, integrated mills will come from.

It’s also worth reading Ethan Bernard’s article here. That will give you a good recap of the news and of what the various parties are saying. It also features some good insights from Josh Spoores, head of steel analysis in the Americas for CRU, SMU’s parent company .

A couple of thoughts after reading that article: President-elect Trump is nothing if not unpredictable. He endorsed H-1B visas after campaigning against immigration. Could he change his mind on Nippon-USS as well?

Or perhaps Nippon will decide to buy a part of USS – its attractive mining and pelletizing operations, for example. And let’s remember that there is nothing stopping Nippon from building a mill in the US. Doing so would cost a lot less than $15 billion.

The unfortunate part of all of this: It now seems more likely that production could be cut at U.S. Steel’s integrated facilities, with Mon Valley Works in Pennsylvania arguably the most likely target. That wouldn’t be an entirely new story. We’ve already seen U.S. Steel end integrated steelmaking at Great Lakes Works and at Granite City Works.

An idling at Mon Valley wouldn’t happen overnight. And I don’t have any inside information. But I wouldn’t be shocked if, for example, news started leaking out that U.S. Steel had begun qualifying customers of Mon Valley Works at Gary Works in Indiana.

“The past is never dead”

While I think that Nippon’s deal was a good one for USS, I’m also not surprised that it didn’t happen. I was always a little leery of some early analyst predictions that the only hurdles to the transaction would be the usual regulatory ones.

I suspected the issue would become political, especially in an election year. And it officially did when Trump announced his opposition to it last January.

I’m not surprised by what happened partly because I grew up in and around Pittsburgh. My dad, uncles, and grandfathers all worked in mills in the area. Some briefly, some for decades. (My dad paid for college by working at LTV – and J&L before that – during summers. That kind opportunity no longer exists in our era of ballooning student debt.)

I also remember going to dirt track races, tractor pulls – even a NASCAR race in Bristol, Tenn. And I was shocked at times to see people carrying anti-Japanese signs – as recently as the early 2000s. They had nothing to do with the races. And they sometimes seemed to conflate Pearl Harbor, Sept. 11, and the decline of the steel industry in the 1980s – a time when Japan occupied a place in the popular imagination somewhat like the one China does now.

I was convinced that kind of stuff was from another era and would pass with time. But maybe I was wrong. “The past is never dead. It’s not even the past.” That’s probably one of the most famous quotes from William Faulkner. And it might be as true now as it was in the early 1950s, when Faulkner wrote it.

When work at the mills dried up in the ‘80s and ‘90s, one of my uncles went back to farming, something he’d learned from his father. Maybe this was an example of what social scientists call “de-industrialization”? There was no work in the mills for my cousins. And I was pretty much told that getting into steel was a very bad idea. (I didn’t listen well.)

Also, it’s not just steel that left town. My uncle who worked at Aliquippa Works had a pickup and a Volkswagen Rabbit. Why? Every farmer had a pickup. And the Rabbit was good for gas mileage and getting around town – especially when gas prices where high. It also had the added advantage of being made in Western Pa.

Yep, Volkswagen had an assembly plant in New Stanton, Pa., as folks of a certain age might recall. VW, I was surprised to learn, was one of the first foreign automakers to set up shop in the US. But that plant, like a lot of steel production, closed in the 1980s.

That output was soon replaced (and then some) by “new domestic” automakers, including big Japanese brands like Honda and Nissan. Some of you might remember “Gung Ho”, a Michael Keaton movie (also from the 1980s) that riffed on this theme. VW, meanwhile, moved production to Mexico and to Tennessee, which was non-union at the time.

What comes next?

I am still asked now and then by family members of a certain age, “When will steel come back?” And I typically say something along the lines of, “Well, it never really left.” First it moved “west” to places like the Chicago area. Over the last two decades, it’s increasingly moved South, with the rise of EAF steelmaking.

Of course, steel is still being made in/around Pittsburgh at places like Mon Valley Works and JSW Mingo Junction. Heck, you could make a case that it’s coming back again with Nucor’s new sheet mill in West Virginia. (Side note, I am often surprised that people who ask me whether steel will make a comeback don’t know the names “Nucor” or “SDI”.)

But the feeling of loss is real. And Trump, who sometimes seems to be rooted in the 1980s, maybe has an intuitive sense of that, one that allowed him to better connect with voters in a swing region of a swing state.

So why am I getting back to politics? Business is not just revenue and profits – although those are very, very important! It’s also culture and history.

The notion of a pension or of working at a mill to pay for college is mostly lost to my generation. But it’s something a lot of us from places like Pittsburgh, Weirton, or Youngstown remember hearing about.

I don’t want to say it’s a lost Golden Age. But it was a time when upward mobility seemed more the norm, or at least more within reach of most people. You’d definitely do better in the mill or at an auto plant than your father or grandfather did scraping by on a farm.

Losing such opportunities is a tough and personal story for a lot of families. I have a lot of issues with making America “great again.” It’s pretty good here, all things considered. Still, I can see why the notion, embraced explicitly by Trump (and less explicitly by Democrats), has an appeal.

In any case, there is something of a consensus now that globalization didn’t work out as planned. Maybe the fate of this deal is a reflection of that.

I’m not exactly sure what to call what’s coming next. Nationalism? Isolationism? Everyone goes their own way-ism? Will whatever this next era is work out better for the US and former steel towns in/around places like Pittsburgh and Youngstown? I guess we’re about to find out.