The USW has stated its opposition to the acquisition of Ohio-based aluminum company Aleris by Chinese-controlled company Zhongwang USA. Aleris announced on Aug. 29 that it had entered into an acquisition agreement with Zhongwang for the purchase price of $2.33 billion.
USW International President Leo W. Gerard wrote in a letter to the Treasury Department that Zhongwang has been the subject of numerous U.S. allegations of dumping, subsidization and circumvention of extruded aluminum products and has refused to participate in the proceedings.
Wrote Gerard, “Zhongwang’s attempt to take over Aleris is a critical transaction that comes at a time when the U.S. aluminum sector is extremely vulnerable as a result of unfair, illegal, predatory and protectionist practices – many of which included the activities of the ultimate beneficial owner in this transaction. The aluminum sector is critical to America’s national security and, for that reason alone, the acquisition should be rejected. But, in our view, it is also critical to America’s economic security and we believe that national and economic security are inextricably intertwined.”
Gerard lauded a group of Senate members who also oppose the transaction. Twelve bi-partisan U.S. senators, led by Sen. Ron Wyden (D-OR), urged the Committee on Foreign Investment to reject the bid by Zhongwang to buy Aleris.
In a Nov. 2 letter to the Committee the senators stated:
“Zhongwang's purchase of Aleris would directly undermine our national security, including by jeopardizing the U.S. manufacturing base for sensitive technologies in an industry already devastated by the effects of China's market distorting policies, and creating serious risk that sensitive technologies and knowhow will be transferred to China, further imperiling U.S. defense interests.”
The senators stressed that aluminum is a “critical strategic material to our national defense” and that China policies have disrupted the aluminum market.
Wrote the senate group, “It is increasingly critical that CFIUS exercise particular caution when a foreign investment transaction creates potential for military knowhow and sensitive technology to be transferred to China's government. Chinese entities, including state owned or state controlled enterprises, may have relationships with China's military, compounding the risk that U.S. technologies will fall into the wrong hands. In this case, the transaction raises serious concerns that it may result in the transfer of sensitive R&D to China. Aleris' R&D and technology are critical to current and longterm U.S. economic and national security interests given Aleris' use of advanced research and modeling techniques, development of high-strength alloys, and design of light armor material with increased ballistic performance.
“Despite the national security importance of our nation's aluminum sector, the industry continues to be decimated by China's market distorting policies that contribute to vast overcapacity. China's overcapacity in aluminum has directly contributed to severe reductions in U.S. domestic production as smelters unable to compete have been forced to close. Each such closure further imperils our nation's ability to ensure a reliable supply of strategic materials in times of crisis.
“The Chinese policies that have contributed to the hollowing of our nation's industrial base have been implemented and utilized by Zhongwang and other Chinese state-owned and state supported enterprises to the detriment of U.S. security. It is important to note that Zhongwang is currently under investigation by the Commerce Department for allegedly evading U.S. import duties. Given this history, in the course of reviewing the transaction, we further urge CFIUS to carefully scrutinize the veracity of Zhongwang's representations regarding the acquisition.”
Amanda Xu, spokeswoman for Zhongwang USA, said the senators’ opposition is not based on fact.
“Contrary to what was stated in the senators’ letter, Zhongwang USA and the Zhongwang group of companies are neither state-owned nor state-controlled,” Xu told the South China Morning Post. “Zhongwang is a fully market driven company without any affiliation to any government.”
According to a statement by Aleris to the South China Morning Post, less than 1 percent of Aleris sales goes into defense applications and is not produced in the U.S. Aluminum plate used by the defense industry is produced by its Koblenz, Germany facility.
“Much of this has to do with prejudice, unjustified worries, protectionism and politicking,” said Kevin Guo, a Shenzhen-based analyst at Guotai Junan Securities.
Aleris is a leading producer of aluminum flat-rolled products with 14 facilities in North American, Europe and China. The company produces high-value advanced aluminum products that are used in aerospace, automotive, defense, building and construction, transportation, packaging and consumer goods. The Koblenz facility produces aluminum plate with corrosion resistance and ballistic protection for use in amphibian and other armored vehicles. Aleris employs more than 950 USW members at its U.S. facilities.