Arbitration Board Green-Lights Sale of US Steel to Nippon Steel Amid Union Resistance

A rally by U.S. Steel employees is held outside the United Steel Tower in downtown Pittsburgh to display their support for the transaction with Nippon Steel Wednesday, Sept. 4, 2024. AP Photo/Gene J. Puskar

An arbitration board has ruled in favor of U.S. Steel, allowing its proposed acquisition by Japan’s Nippon Steel to proceed despite stiff opposition from the U.S. company’s labor union.

The board, jointly selected by U.S. Steel and the United Steelworkers (USW) union to settle disputes between the two related to their Basic Labor Agreement (BLA), announced on Sept. 25 that U.S. Steel had met its obligations under the agreement’s successorship clause. As a result, no further action under the BLA is necessary for Nippon Steel to assume U.S. Steel’s union-related agreements and move forward with the transaction.

The USW, which filed grievances in January, had argued that U.S. Steel had not met the terms required to ensure a smooth transition of labor commitments under the proposed deal, while also citing threats to long-term job security and retirement benefits for its members.

However, the arbitration board, after hearing arguments from both sides in August, ruled that Nippon Steel had provided sufficient written assurances regarding its commitments to the unionized workforce. In its ruling, the arbitration board singled out key commitments the Japanese steel company made as part of the deal.

Specifically, the board said Nippon Steel has pledged to recognize the USW as the bargaining representative for employees at U.S. Steel, invest at least $1.4 billion in U.S. Steel’s union-represented facilities, avoid layoffs or plant closures during the term of the existing labor agreement, and protect the best interests of U.S. Steel in trade matters.

David Burritt, U.S. Steel’s President and CEO, welcomed the decision.

“With the arbitration process now behind us, we look forward to moving ahead with our pending transaction with Nippon Steel,” Burritt said in a statement. “With the significant investments and contractual commitments from Nippon Steel, we will protect and grow U.S. Steel for the benefit of our employees, communities, and customers.”

In response to the arbitration board’s announcement, the USW issued a statement upholding its opposition to the deal and expressing disappointment with the ruling.

“We strenuously disagree with the result,” USW leaders said in a statement. “Nippon’s commitment to our facilities and jobs remains as uncertain as ever, and executives in Tokyo can still change U.S. Steel’s business plans and wipe them away at any moment.”

The union voiced concern that unless Nippon Steel makes “iron-clad, enforceable commitments” to maintain blast furnace operations well into the future, critical steel production capacity for automotive, infrastructure, and military needs could be lost.

“As we know, these products cannot be made in electric arc furnaces,” union leaders wrote. “USW members will be here after the executives and shareholders cash out. We aren’t looking just to the expiration of the current contract in 2026 but to our lasting ability to make the steel America urgently needs.”

While the arbitration ruling clears a significant hurdle for U.S. Steel’s acquisition by Nippon Steel, the deal still faces regulatory scrutiny from the Committee on Foreign Investment in the United States (CFIUS), which is reviewing the transaction for potential national security risks.

Earlier reports indicated that CFIUS had identified concerns with the deal, leading to an extension of the review process. The USW has echoed these concerns, arguing that Nippon Steel’s history of trade practices could threaten U.S. steel production and supply chains, particularly in defense-related sectors.

The arbitration board itself acknowledged in its Sept. 25 announcement that the merger “may not happen at all due to the lack of government approval,” reflecting the uncertainty surrounding the CFIUS review.

The proposed acquisition has drawn attention from political leaders, with both President Joe Biden and former President Donald Trump expressing opposition, citing concerns about American jobs and manufacturing.