Let’s talk turkey about chicken. Not chicken, the popular poultry that’s probably on your plate for dinner tonight — chicken, the test of wills “game” that goes on until somebody gives in.
The problem with playing chicken is that in most cases, both players lose. Take, for example, the chicken scene in the movie Rebel Without a Cause in which Jim Stark bails out of his car first, theoretically making him the loser, yet Buzz Gunderson goes over the cliff, killing him and making him the ultimate loser.
It seems the only way to win at chicken is to never play. And yet a big labor union is playing chicken with an important industry.
Here’s the backstory: Last year, Nippon Steel, a Japanese company, made a generous offer to purchase the shares of U.S. Steel, an American company. Nippon was offering a 40% premium on what the shares were trading for at the time, and U.S. Steel wanted to make the deal at that price.
But wait, there’s more! The agreement is even better now. Nippon executives say the company will not close any plants or lay off any steelworkers. They say it will invest an additional $1.4 billion in U.S. Steel’s facilities.
However, that isn’t enough for the United Steelworkers union. It is finding things to nitpick.
For one, members complain that Nippon’s no-layoffs promise would “remain valid only through the end of the current labor contract.” That is true and irrelevant. No company can promise to maintain employment numbers forever. That is why contracts are renegotiated when they expire.
The union also tried to raise concerns about national defense. But this line of attack makes no sense either.
“Japan has been one of the United States’ closest allies for 60 years, hosts US military personnel and Department of Defense (DOD) civilians and their families and acquires more than 90 percent of its defense imports from the US,” the CATO Institute writes.
Japan is concerned about a rising China, just as the United States is. The Associated Press reports that Tokyo recently “sought a record 8.5 trillion yen ($59 billion) budget for the next year to fortify its deterrence on southwestern islands against China’s increasing threat.” A stronger alliance with Japan and Japanese companies is good for American defense.
“It’s a complicated game being played between Nippon Steel and the local steel union,” analyst Jonathan Grady told the New York Times. “Almost a year in, the Nippon Steel merger deal has turned into something like a high-stakes, $15 billion game of chicken.” Of course, as with any game, people are lining up to back a team. Sadly, our leading politicians are all on the wrong side.
Vice President Kamala Harris marked Labor Day by vowing to oppose the merger. Her current boss, President Joe Biden, also opposes the merger. Former and prospective future President Donald Trump also says he opposes it. They all agree, and they are all wrong.
As if to sum up the conventional wisdom, Harris says it “is vital for our nation to maintain strong American steel companies.” But that is missing the point: the Nippon-U.S. Steel tie-up would do exactly that.
“As a result of the transaction U. S. Steel and all of its facilities will directly benefit from Nippon Steel’s significant R&D efforts (~$500M annual spend), its global expertise, world-leading blast furnace know-how, and strong financial position,” Nippon notes in a news release. It would be improving American plants operated by Americans.
Our country needs such investment.
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U.S. Steel was once a powerhouse, but is now only the 27th largest steelmaker in the world. “Nippon’s acquisition of U.S. Steel would create the world’s second-largest steelmaker and a close competitor to China Baowu Steel in terms of production capacity,” defense analyst Bob Carey writes in the National Interest. He adds the deal would empower “America and its allies to counterbalance Chinese manufacturing.” That is what Harris, Biden, and Trump should be cheering for.
The steelworkers are driving toward a cliff, but it isn’t too late for them to change course and support the Nippon deal. They need to call off the game of chicken before it kills what would be a good deal for the U.S.
Rich Tucker is a writer and editor based in Richmond, Virginia. His work can be found at https://richardbriantucker.substack.com/.