This weekend, the board of directors of the United States Steel Corporation met to accept a $14.9 billion offer by Nippon Steel of Japan to buy the storied industrial giant. The move ends a four-month bidding war that included American rivals like Cleveland-Cliffs and Nucor and foreign titans like ArcelorMittal.
Nippon was not considered one of the leading candidates heading into the weekend. Ultimately, money talked. The Japanese company outbid Cliffs and ArcelorMittal by more than $10 a share, and doubled Cliff’s initial offer earlier this year. Nippon will pay 40% more than U.S. Steel’s closing stock price last Friday.
In the short run, Nippon says little will change. Their new American holdings will still be called U.S. Steel, and they plan to honor all existing collective bargaining agreements. But massive ownership changes like this rarely avoid consolidation and cost-saving measures.
Nippon is the world’s third-largest steelmaker. It has pursued several acquisitions in recent years, including the 2019 purchase of India’s Essar Steel. The company seeks to reach a steel production goal of 100 million tons per year, which would make it the world’s largest steelmaker outside of China.
The United Steelworkers of America already indicates they oppose the deal. The union favored a domestic deal with Cleveland-Cliffs, a company they believed would better serve workers and American interests.
The deal could become a political hot potato tossed up and down the swing states of the Rust Belt. Ohio’s U.S. senators, Republican J.D. Vance and Democrat Sherrod Brown, the latter up for re-election in 2024, will likely protest aspects of the merger. Minnesota’s congressional delegation, President Joe Biden and former President Donald Trump will all be drawn into the fray.
That’s because the sale of U.S. Steel holds tremendous consequences for workers, families and whole regions across the U.S., including Minnesota’s Mesabi Iron Range. Here, U.S. Steel holds stakes in three mines employing almost 2,500 workers. Moreover, no company was more responsible for the development of the Iron Range than U.S. Steel.
But that was not the company board’s primary concern. They have stockholders to worry about, just like in 1922.
A heartfelt plea
This is not the first time the people of the Iron Range were stuck waiting for a momentous decision by the Steel Trust. This iron mining region in northern Minnesota made a fervent pitch 101 years ago they hoped would bend U.S. Steel toward the communities and workers who mined the all-important iron ore.
What they got was instructive, or at least should have been.
Starting in late 1917 and early 1918, U.S. Steel’s Oliver Iron Mining Company and the local village government announced plans to vacate the original townsite of Hibbing. A mother lode of the richest iron ore in the world lay just a few feet below the surface. Meanwhile, a great war raged overseas — one that now included American soldiers — ensuring top dollar for every shovelful.
Mayor Victor L. Power of Hibbing made a career fighting the mining companies, especially U.S. Steel, for the financial and political independence of the towns on the Iron Range. He believed the companies owed a fair share to the communities affected by mining, and that those communities had a responsibility to build for a future after the mines closed.
But when plans to mine under the town became clear, Power cut a deal. He would support the move if the company compensated the displaced land owners and built an even better town two miles to the south. In retrospect, it was a logical deal. It lead to the construction of the most expensive high school in the country and an all brick downtown that included a modern luxury hotel.
And yet, the deal left many in a precarious financial situation. The original Hibbing was a municipal and commercial center. Two mostly residential additions, Pillsbury and Southern, remained in North Hibbing. Everyone who owned land in these places was stuck in a collapsing real estate market as the town’s new development went south with the merchants.
In the next few years, Power expended his vast reserves of popularity and political guile defending the move of Hibbing. By 1922, he hit bottom, losing re-election to a fellow lawyer and recent world war veteran named John M. Gannon.
Gannon believed that Power was too busy making deals with U.S. Steel to fix Hibbing’s predicament. He thought that if the town asked U.S. Steel to buy out the remaining North Hibbing properties in order to secure the iron ore under those locations, both town and company would benefit.
Gannon traveled to New York to see “Judge” Elbert Gary in person.
Gary is the most influential industrialist of the 20th Century that you probably don’t know about. Back in school, you heard about “robber barons” like John D. Rockefeller, Andrew Carnegie, J.P. Morgan and James J. Hill. But by 1901 these guys had already crushed their enemies and become professional rich people. The real evangelist for a new American economy was Gary, who led U.S. Steel after its formation in 1901 as the world’s largest and first billion-dollar corporation.
Gary fought to keep the 12-hour workday and to meld the corporation with Christian thought, arguing that religion made “simple, plain business sense.”
By 1922, Gary no longer served as president of U.S. Steel, but still chaired the board of directors, where he guided the company’s big decisions. And he had a cold. So when Gannon and his delegation of local Hibbing politicians arrived in New York on Dec. 19, 1922, they saw Gary in his bed chambers where his doctor had ordered him to stay.
The earnest and well-spoken Gannon reportedly gave the speech of his career, flipping through maps and charts showing that the steel company would not only solve the financial woes of half of Hibbing, but would secure iron ore for a century to come.
Gary seemed impressed, but balked at the $6.5 million price tag (about $113 million in today’s dollars). He invited Gannon to repeat the performance at the next meeting of the company finance committee. Three weeks later, Gannon was in U.S. Steel corporate headquarters at 71 Broadway with the hopes of Hibbing riding on his shoulders.
This time, Gary gave a polite thank you and said his answer would be forthcoming. Gannon went home to a ginned-up town expecting good news. What he got was a thin envelope from U.S. Steel with a single piece of paper inside.
“We have unanimously reached the conclusion that there is no legal, equitable or moral ground for allowing the claims,” wrote Gary. “It has always been our disposition to establish and maintain friendly relations between our subsidiary companies and their neighbors, and shall not intentionally do anything, or refrain from doing anything, to disturb such relations. At the same time we must not overlook nor minimize our official responsibilities and limitations.”
Those “moral” responsibilities were to the company stockholders.
U.S. Steel would get the rest of North Hibbing for cheap over the next several decades as property owners went broke and eventually died.
Cliffs now owns a majority share in Hibbing Taconite, which will scrape away the last of the marketable ore in North Hibbing during the next few years.
Legacy of profit
I’m sure there’s a wingback leather chair somewhere in the U.S. Steel corporate inventory that once belonged to Gary. I’d bet that current CEO David B. Burritt has sat in that chair and felt pretty proud of himself. So would I if I were allowed anywhere near a chair like that. But he’s not Gary.
The people of the Iron Range are no longer merely subservient to the whims of a powerful man, or even a board of directors. Not anymore. Instead, we have become the subjects of Gary’s true heir, the holy spirit of global corporatism. It’s a power greater than us all, filling in the void with profitability and ROI, lifting up the portfolios of billions. Billions of dollars, that is, controlled by a group small enough to fit in a hotel ballroom.
The proof is in the price. Adjusted for inflation, steel costs a fraction of what U.S. Steel was getting at the time Hibbing moved 100 years ago due to automation and massive job letting. And yet corporate profits are just as good.
Labor took a hard-won share. The American labor movement that Elbert Gary sought to destroy took root after his death and eventually organized the workforce of U.S. Steel and other companies. Today, the United Steelworkers of America attacked the Nippon deal to purchase U.S. Steel.
“To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long,” reads the union statement.
They could have said “forever and always.” The philosophy that guided U.S. Steel’s formation and growth, and that of the rivals that overcame and consumed it, remains as strong as ever.
Many Iron Range steelworkers now choose to work 10- or 12-hour days to capitalize on generous overtime pay made possible by layoffs. A conservative, more religious political order has ascended to local leadership. Judge Gary could not have drawn up a more favorable condition in his wildest dreams. He might have lamented the foreign ownership, but he would have been far too rich to complain all that much.
This is now like a movie trope where the protagonist flees a ferocious predator, only to watch the predator eaten by a larger beast, which is then eaten by an even more fearsome monster. The only thing protecting the Iron Range is that the ultimate corporate singularity might forget we exist.
But this is hardly reassuring.
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