Arbitrator hands win to US Steel on embattled Nippon deal

This picture taken on February 16, 2024, shows a logo of Nippon Steel Corp. at the company’s Kyushu manufacturing base in Kitakyushu city of Fukuoka Prefecture. (Photo by Philip FONG / Agence France-Presse)

NEW YORK, United States — Arbitrators ruled that Japan’s Nippon Steel has proven it can assume United States Steel’s labor contract obligations in a win Wednesday for an embattled proposed transcontinental merger.

While Nippon’s $14.9 billion takeover of Pittsburgh-based US Steel still faces significant challenges in the wake of furious bipartisan political opposition, the decision was greeted by US Steel and condemned by the steelworkers union, which has fought the deal.

The United Steelworkers (USW) had argued that the deal left union members vulnerable to plant closures, lost pension payments, and other violations of its existing contract because Nippon is a foreign company with a US “shell” subsidiary.

But following an August hearing into the matter, a board of arbitrators ruled in favor of the company.

READ: Nippon Steel pursues U.S. Steel deal, cites ‘deep roots’ in US

According to a US Steel press release, the panel determined that Nippon had recognized the USW; provided “reasonable assurances” that it has the financial health to assume obligations; and assumed all the USW agreements with US Steel.

“With the arbitration process now behind us, we look forward to moving ahead with our pending transaction with Nippon Steel,” said US Steel Chief Executive David Burritt.

While US Steel cheered the ruling, the decision “misses the mark,” the USW said in a news release.

“Nippon’s commitment to our facilities and jobs remains as uncertain as ever, and executives in Tokyo can still change US Steel’s business plans and wipe them away at any moment,” the union said. “We’re clearly disappointed with the decision, but it does nothing to change our opposition to the deal.”

READ: Biden seeks to block Nippon Steel bid, triple Chinese tariffs

The deal still faces major headwinds due to the opposition of President Joe Biden as well as both of the major presidential candidates, Vice President Kamala Harris and former president Donald Trump.

The Biden administration has delayed a national security review of the politically sensitive deal until after the November presidential election.

US Steel has warned that if the sale is blocked, it could shutter facilities in Pennsylvania – perhaps the most critical swing state in the election between Harris and Trump.

Burritt expressed optimism in a CNBC interview Tuesday that the deal would close.

“I’d invite them to come to the table,” Burritt said of the USW. “We’ve been very clear on what the benefits are and how this will help, not just the stockholders, but more importantly the workers.”