Japan business lobby urges fairness in U.S. Steel buyout review

It is very fishy that this has to happen "in the run up to the November election" instead of waiting until after.

Nippon Steel Corp. should have waited until after the election. So much for 'reading the air'.

An official of the federation, also known as Keidanren, said, "We don't understand why (the U.S. government) is trying to block the deal. If rejected, the reason should be a focus."

Seriously? They don't understand? The US government, as well as the workers and general population, do not want foreign ownership. Pretty simple.

You'd think Japanese would understand that, as that very same attitude is so prevalent in Japan.

An official of the federation, also known as Keidanren, said, "We don't understand why (the U.S. government) is trying to block the deal. If rejected, the reason should be a focus."

I've only watched snippets of interviews on CNBC and Bloomberg, and can say the 'national security' rationale and the reasonings are convincing, if not essential for maintaining government control over 'dual use' industries.

If the Japanese Federation can't see this, how are they going to foresee threats in the future?

There was an offer made for US Steel by another American steel maker Cleveland Cliffs that was valued at $7.3 billion, well short of the Nippon Steel offer. The US auto industry was staunchly opposed to a Cleveland Cliffs buyout on anti trust grounds as such a buyout would force the auto industry to buy over 90% of their steel from one company. They are already the largest producer of flat rolled steel and iron in the US. That one was probably going to face regulatory push back to prevent the formation of a monopoly on flat rolled steel.

Today there was another offer from a Pittsburg based industrial conglomerate Esmark. They are offering $7.8 billion, still well short of the Nippon Steel offer. Pittsburgh-based Esmark is run by James Bouchard, a former vice president in U.S. Steel’s European operations. In an interview, Bouchard said he is interested in modernizing U.S. Steel and keeping the company under American ownership. Besides its steel-producing and distribution business, privately held Esmark has operations in aviation, oil and gas exploration, real estate and other industries.

https://apnews.com/article/us-steel-esmark-clevelandcliffs-takeover-fbb1be179292a2247e44a99d19e49b9c

Seriously? They don't understand? The US government, as well as the workers and general population, do not want foreign ownership. Pretty simple.

Not so simple. Ever hear of the Jones Act? It was passed during WWI when it was apparent the US shipbuilding industry of that time was wholly inadequate for the needs of a nation at war. Sound familiar? Congress passed a law that any ship that is engaged in commerce between two US ports must be made in a US shipyard, owned and operated by an American company with an American crew.

What is the end result? Every aspect of the US maritime industry is obsolete and grossly over priced. Because the kinds of vessels needed for commerce between US ports are pretty limited, US yards can only build those kinds of ships. No US yard builds modern LNG carriers. No US shipyard is building modern container cargo ships or very large ore carriers. NASSCO in San Diego can build some modern tankers but not much else and nothing at a price anyone outside of a Jones Act protected shipping line is willing to pay.

For modern offshore support vessels US yards have to hire European shipyards to come in and set up shop to teach them how to build modern vessels. Same for offshore wind power construction and support vessels. American yards have no idea how to build these. And they will only build them for use by projects in US waters because the shipyards are high cost and not competitive internationally. The US flagged merchant fleet is tiny simply because everything about the industry is non competitive internationally. The only work they do is from one US port to another or hauling freight for the US military.

Shipyards in China, South Korea, Japan, Italy and Germany have full order books. US yards are begging for orders. The former US Navy Shipyard in Philadelphia has been under private ownership since the early 1990s when the US Navy closed that yard, but the owners ran out of orders and the whole yard was recently purchased by a big South Korean shipbuilder. Even the Military Sealift Command has to buy used merchant ships on the open market because US shipyards cannot build some of the ships they need to support the US military's sealift needs.

That is what protecting an industry gets you. All you achieve is to reward inefficiency, laziness and lack of innovation.

Not so simple

Why not? Throughout history, steel making has had national security implications, particularly for America! It is that simple, no country would trade national security for a fading globalization ideology. Have you not noticed, reshoring, derisking, deglobalization?

Even without an end to globalization, ArcelorMittal history is a perfect example of why no country should trust the promise of a foreign corporation.

Mittal promised France all the things Nippon promised USA today, and more. Only a short time later announced that economics means they have to shut French plants, fire skilled AND unskilled workers. France then had to deal with it as internal politics (and we know USA politics is much more intense), and in the end the French left won who then threatened Mittal with nationalization of French plants. All this occurred 10 years or so a go, and would be everyone's mind.

IMHO, Nippon board is totally inept, picking an election cycle to pursue the deal AND also promise exactly the kinds of promises that has proven worthless before. I shake my head each and every time I read about it.

Even without an end to globalization, ArcelorMittal history is a perfect example of why no country should trust the promise of a foreign corporation.

If a business cannot compete globally it richly deserves to die. There is no economic argument for protecting inefficient obsolete businesses. None. Countries that tried like India, Argentina and Brazil all of which in the 1960s chose the patch of what economists of the time called "Import Substitution" imposing prohibitively high tariffs on imports while subsidizing domestic production all had to give this tactic up when their economies faced collapse. Australia and New Zealand likewise had to give up on their high tariffs in the 1990s as their economies suffered. In the long run protecting a failing domestic industry never works. They either find ways to be internationally competitive or they die. The government has absolutely no business propping up inefficient industries. You cry "national security" but even that won't save a failed industry. Look what protection and the "national security" cry has done to American shipbuilding. These slugs cannot even meet the Navy's orders. They have high turnover in an industry where skills can take many years to perfect (skills such as welding the specialized high strength steels used on submarines and aircraft carrier flight decks where welds have to be perfectly smooth with no voids or bubbles). Even when national security is involved protection fails. Protected industries atrophy and become hopelessly inefficient. Even now the US DoD has to go out and cultivate newcomers to the defense industry because their traditional suppliers just cannot get the job done. The F-35 program is a great example but you see it with the KC-46 tanker program and the Comanche attack scout helicopter program the US Army had to cancel.

If a business cannot compete globally it richly deserves to die

This^^ ignores the loud AND direct message about 'national security'. The nation pays for it, it's NOT viewed as a going concerns.

USA subsidised SGI for decades, even after it stopped making hardware, and stopped software support, because sgi machines were used to maintain nuclear power plants.

You could just ignore all the economic arguments....

USA subsidised SGI for decades, even after it stopped making hardware, and stopped software support, because sgi machines were used to maintain nuclear power plants.

SGI? Do you mean Silicon Graphics? The went through multiple bankruptcies and were bought out by Rackable Systems except for their Silicon Graphics International division which HP picked up, allowing HP to add the TOP500 supercomputer at NASA Ames Research Center to its portfolio.

I keep trying to tell you, all the economic history says that subsidizing and protecting industries even in the name of national security only leads to their eventual demise. They grow costly, inefficient and have no motivation to innovate since they face no competition.

I keep trying to tell you, all the economic history says that subsidizing and protecting industries even in the name of national security only leads to their eventual demise

...and I keep telling you this is not protecting an industry, this is national security, Japan of all nation should know that having pumped how much into QE now???

Trading national security for economic rationalism didn't work for France (ArcelirMittal deal), it lost government even when imported steel was less than 10% (British Aircraft Carriers), and how much has USA pumped into bank failures???

Globalization is finished, the focus is now on national sufficiency, for steel it would even be more crucial. Have you not noticed Trump, Trudeau steel tariffs? It is designed to keep foreigners out.

But let's entertain your argument one last time, ultimately let's assume we let US steel rot on the vine, China or Japan is going to run USA's next Lend Lease??? WHEN HELL FREEZES OVER. Lend Lease was not that long ago, and there are now kinetic conflicts on 2 continents, 3 if you include China's actions in the SCS.

National Security, trumps all else, especially economic rationalism and Globalization.

Yes SGI, despite its inability to stand as an economic entity, US governments (DARPA) continued its funding for decades, or at least until workstations running Unix could be sourced elsewhere that offered comparable up time. They were employed in many of USA's nuclear plants.

SGI workstations, manufactured in Switzerland had uptime of forever, back when NT workstations had to be rebooted every day. Sure they were hideously expensive and uneconomic, but they were essential. Some people speculated that a workstation that costs $40k retail actually costed USA a few $millions per seat by the time they were replaced.