Inspired Idiot of the Week: Everyone Who Ruined the Sale of US Steel
by James Hickman via Schiff Sovereign
On March 2, 1901, a group of prominent American businessmen, including J.P. Morgan, Charles Schwab and Andrew Carnegie, came together to form the largest business enterprise the world had ever seen.
Through the consolidation of Carnegie Steel Company along with several other steel and iron businesses, they formed US Steel.
And it was immediately the world’s first billion-dollar corporation.
But that was just the beginning. US Steel quickly became a symbol of American industrial might.
It played a crucial role in building the infrastructure of the United States, supplying steel for skyscrapers, bridges, automobiles, and railroads. During both World Wars, US Steel’s production capacities were pivotal in supporting the Allied military efforts.
By the 1940s, there was hardly a more fitting icon of American prosperity.
But things slowly started to change.
After World War II, the economy globalized and trade flourished. US Steel suffered from increased competition from foreign steel producers, and then, in later years, a decline in the American manufacturing sector.
Slowly the company diminished to just a shadow of what it used to be.
The decline of US Steel culminated in a bidding war last year by larger rivals who were eager to absorb the company.
Another American steel producer named Cleveland-Cliffs offered to buy US Steel for roughly $7 billion.
But Japan-based Nippon Steel offered double the amount— $14.1 billion— and also promised to inject $1.4 billion in capital to upgrade US factories. Somewhat poetically, $1.4 billion was the exact original capitalization of US Steel back in 1901.
Naturally, US Steel accepted the higher offer. $1.4 billion in foreign investment would do a lot of good for the company, for the steel industry, and for the US economy.
You know how the people in charge always love to talk about manufacturing jobs? Well, a $1.4 billion foreign investment gets you a LOT of manufacturing jobs.
Case closed, right? Of course not!
Cleveland-Cliffs (the company that lost the bid to Nippon Steel) was bitter that they didn’t win, fair and square, in a free market. So they decided to play dirty.
The CEO called-in his friends in the Biden Administration. And sure enough, Joe Biden personally came out, guns blazing, to slam the Nippon Steel acquisition.
Team Biden has now pushed the deal over to the US Committee on Foreign Investment, which has been tasked with investigating “national-security concerns”.
Come again? US Steel is a has-been company in decline that’s supposed to be acquired by a US ally. To pretend that this is a national security concern is a complete joke.
Cleveland-Cliffs then rallied the United Steelworkers union, whose president vocally asserted that “the only buyer the union accepts for the [sale of US Steel] is Cleveland-Cliffs.”
Wait a minute— who exactly is the owner of US Steel? Call me naive, but I thought it was the shareholders.
Yet apparently the basic fundamentals of capitalism don’t matter to Joe Biden, or to the United Steelworkers union.
In their view, the union is in control, and the union gets to decide who the new owner will be… even if the purchase price is vastly inferior.
Nothing official has been announced. But the Cleveland-Cliffs CEO is already bragging about how he killed Nippon Steel’s acquisition:
“We have been in total contact with the [Biden] administration, so I know what’s going on… This deal is dead… There is no more lobbying, there’s no more negotiation. It’s over.”
And like a vulture circling overhead, Cleveland-Cliffs indicated that they intend to scoop up US Steel’s assets for a bargain… potentially even less than their original bid.
And once Cleveland-Cliffs absorbs US Steel, it will control ALL US blast furnace production, and up to 90% of American steel used in vehicles, according to the Wall Street Journal.
That’s a virtual American steel monopoly.
The reason I raise this issue is because, just a few weeks ago, the Federal Trade Commission (FTC) sued to stop a merger between two grocery store chains (Kroger and Albertsons), claiming that the deal would create a monopoly and hence harm consumers.
Wait a minute— if a potential monopoly of grocery store chains is bad, then why isn’t a clear monopoly in the steel industry equally bad?
You’d think the FTC would apply the same logic to US Steel. But they’re not. The FTC has been completely silent on the matter. And the reason is obvious: the United Steelworkers union wants the Cleveland-Cliffs merger to happen, so the FTC won’t stand in its way.
If there has ever been any question about who has the power in this administration, the answer should now be plain as day: this government will do whatever the unions want.
Forget the voters, consumers, or shareholders— unions have the most sway, the most money to put into political campaigns, the most voters to drive to the polls.
And of course, forget what’s actually good for the country and the economy. The Inspired Idiots in charge are completely beholden to union bosses.
That’s a pretty bad sign if you expect things in this country to turn around anytime soon.
A roaring economy is exactly what the US needs to claw its way out of its massive national debt, and restore faith in the US dollar.
Instead, it’s doing everything possible to kill competition and productivity.
And that’s a good reason to have a Plan B.
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