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America likes big things, said the Financial Times in 1901, marveling at the creation of a new American steel company. Like Niagara Falls, the world's first company with capital of more than $1 billion was on a scale that was difficult for the average person to understand, the newspaper said.
This “monster steel trust,” put together by power brokers including John Pierpont Morgan, Andrew Carnegie, and Charles Schwab, would produce two-thirds of America's steel, giving it enormous pricing power. Become. “This could easily give rise to trust legislation of a drastic nature,” the FT wrote, foreshadowing the long battle to break up United States Steel that ultimately failed in 1920.
Last week's news that a takeover battle was brewing for U.S. Steel wasn't greeted with much awe. The Pittsburgh-based company rejected a $7.3 billion offer from rival Cleveland Cliffs and seemed to shrug its shoulders when privately held Esmark followed suit with a $10 billion offer. Both amounts are a Niagara Falls drop compared to the multi-trillion dollar valuations commanded by the country's biggest technology companies.
Steel may no longer capture or symbolize the American imagination, but its most storied name is a reminder of how today's capitalists pursue hugeness and how the United States is now a world leader in size alone. It can tell us something about what we want from important industries that we cannot compete with.
U.S. Steel is still considering “strategic alternatives,” including several unilateral approaches for all or parts of the company. While the company may still maintain its independence, last week's stock price rally has seen investors bet on a sale that could create a new industry leader at home and return the U.S. steelmaker to the world's big leagues. It suggests that there is.
Steel has long been a symbol of the exodus of manufacturing to low-cost countries. Last year, no U.S. steelmakers ranked in the World Steel Association's top 15. China had nine companies on that list.
Still, the industry's enduring political salience has given American steelmakers optimism lately. U.S. Steel CEO David Barritt said President Donald Trump's 25% tariff on imported steel in 2018 was a result of 30 years of “getting sand kicked in the face” by other countries. It was welcomed as a reprieve.
He recently excitedly suggested that Joe Biden's anti-inflation law, which encourages investment in steel-intensive goods like electric cars, be renamed the Manufacturing Renaissance Act. Britt told analysts last month that the $369 billion stimulus package will help protect “this place we've called home for more than 120 years,” but a strong manufacturing base is essential for security in a post-globalization era. He said that this shows that they are finally beginning to recognize that this is the case.
Similar flag-waving appeared from the first line of Cleveland-Cliffs' bid announcement, which promised to create one of the top 10 American steel companies in the world. The deal the company hopes will secure investment in niche materials important to its supply chain. , said it would strengthen the economic security of the United States.
Lourenco Goncalves, the head of the Cleveland Cliffs who once predicted that investors who bet on his company would have to commit suicide, is not known for his vitriol. But his pitch to buy U.S. Steel is a master of stakeholder-capitalist smooth talk, steering the expanded group into an emissions-cutting effort focused on creating union jobs, innovating for customers, and benefiting local communities. Portrayed as an ESG leader.
The resourceful Mr. Gonsalves won over one important stakeholder by securing the support of the United Steelworkers, which praised Cleveland-Cliffs as a “great employer.” The contrast with the early days of U.S. Steel, which went on strike over 84-hour work weeks, could not be more stark, but 21st century businessmen have done much more to build combines than their predecessors did. You have to gain support.
The US government may be the most difficult of these stakeholders to convince. The USW's enthusiasm for the Cleveland-Cliffs' bid should carry some weight for Mr. Biden, a self-described union champion who needs workers' support for re-election. The prospect of creating a globally important American steel manufacturer is consistent with the administration's promotion of industrial policy.
But an agreement with Cleveland-Cliffs or another suitor would test an administration whose antitrust policies are more aggressive than any Washington has seen in recent decades.
To achieve his goal, Mr. Gonsalves will need to convince Mr. Biden's Federal Trade Commission that merging two of the country's four largest steel makers will not harm competition. Together, the two companies would control the country's entire ore supply and about half of the steel sheet production on which other major industries such as automakers depend.
FTC Chair Lina Khan, who had already testified before Congress against the company and listened to the 1920 U.S. Steel case before the Supreme Court, used the era to slam the industry's “curse of bigness.” He was inspired by Judge Louis Brandeis, who spent his time there. Although capitalist tactics have fundamentally changed since the days of Morgan, Carnegie, and Schwab, the tensions surrounding big business remain the same.
We'll soon find out which impulse is stronger in the White House: a desire for national champions in key industries or a suspicion of corporations that are too powerful.
The market reaction suggests investors believe the US still likes big things. So does another heir to the bearded robber baron who founded U.S. Steel. Cleveland-Cliffs is advised by JP Morgan.
andrew.edgecliffe-johnson@ft.com
