As head of the United Steelworkers, McCall finds himself in an unlikely place of power. Labor groups traditionally haven’t had much sway in US corporate takeovers. But 2024 is, of course, no ordinary year. So thanks to a growing political maelstrom that’s thrust the steelworker into the center of campaign rhetoric, McCall is now one of the most crucial voices that can help decide the fate of Nippon Steel Corp.’s proposed $14 billion takeover of the storied United States Steel Corp.
And McCall is preparing for a fight.
“The transaction itself right now, as announced, there’s no way I’d accept it,” he said in a recent interview, indicating that he’s ready to go the brink – even if it means killing the deal – to make sure he can secure the concessions he’s seeking for his union members.
The union doesn’t have any official right to simply block an offer US Steel has accepted. What it does have is political leverage.
The influence of the United Steelworkers (USW) has grown stronger now than in any time in recent memory. Joe Biden has billed himself the most pro-union president in history, but Donald Trump has sought to undercut his labor support, appealing to rank-and-file auto workers and union members who have resented this administration’s clean energy agenda along with other policies. Union voters are seen as one of the key deciding blocs in the November presidential election.
The Nippon bid for US Steel is up for review by the Committee on Foreign Investment in the United States, or CFIUS, a process shrouded in secrecy. Allies of Biden have urged the administration to kill the deal over national security concerns — despite Japan being a close ally — and the threat to unionized steel jobs.
In the end, the final decision could come down to a signal to the White House about whether or not the union likes the deal. The USW has received “personal assurances” that Biden has “our backs,” according to a February statement.
That unique position underscores why interviews with more than two dozen investors, legal experts, steel consumers, brokers, service centers, analysts and executives paint the picture of an industry that is hanging on the words of one man: McCall.
Ultimately, the union holds the “political leverage,” Phil Gibbs, a nearly 20-year veteran covering the steel industry at Keybanc Capital Markets, said in an interview. “They clearly can make noise and if they saber rattle, they get in Biden’s ear or Donald Trump’s ear, or they stage a walk out — who knows what they’ll do.”
McCall’s moment comes as labor groups in the US are getting re-energized. Last fall, the United Auto Workers led a six-week strike that resulted in massive wage increases. That capped off a summer of strikes that saw Hollywood writers and actors walk off their jobs, and meanwhile workers at companies as varied as Starbucks Corp. and Apple Inc. have moved to unionize in recent years.
Even then, it’s hard to overstate just how rare it is for a union to hold this much power during a deal review.
“I can’t recall a situation where unions in particular have been sort of the voice looking to encourage CFIUS to block a deal,” said Rick Sofield, a partner at Debevoise & Plimpton who spent nearly 25 years as a federal government lawyer including helping to oversee national security reviews by CFIUS.
Upcoming meetings
A lot could come down to the next immediate period.
McCall and his top aides at the USW are expected to meet with representatives from Nippon Steel including Executive Vice President Takahiro Mori in the coming days, according to people familiar with the matter who asked not to be named because the information is private.
McCall says that for any discussions with Nippon the most-important points for the union will be: discussing the labor agreement, pension plans, retiree healthcare, capital expenditures and profit sharing.
For its part, Nippon has been telling investors it’s willing to make major concessions that are of importance to the union, according to people familiar with the matter who asked not to be named because the information is private. The concessions cited include making investments at US Steel plants, the people said.
Nippon said it “is focused on developing a productive working relationship with the USW and its members,” according to an emailed statement. The company “has assured the USW that it has the financial wherewithal to continue honoring all agreements currently in place between the USW and US Steel. We are confident that this transaction is in the best interest of the USW and its members.”
Just in the past week, McCall and Nippon confirmed that the two sides had signed a non-disclosure agreement, allowing talks to progress even as the union publicly maintains its opposition to the deal. Investors took that as a vote of confidence. US Steel shares quickly erased losses on the news and climbed as much as 1.4%.
The optimism may be overdone.
For those who are saying that the NDA is a sign of progress in the dealings between Nippon and the union, McCall has strong words: “I would say to you, emphatically, it is a lie.”
“We’ve gone back and forth and back and forth on an NDA, and that’s all we talked about,” McCall said by phone.
McCall’s tone in conversations with Bloomberg over the last two-and-a-half months since the deal was made public has, if anything, grown more hardened.
Less than half an hour after the takeover was first announced in December, McCall told Bloomberg News in a phone call that he was wary of the transaction. The union’s preferred bidder, Cleveland-Cliffs Inc., had lost out, and the winning company wasn’t one many in the market had expected.
“This is not how this is going to work,” he said at the time. “We don’t know Nippon.”
By the end of that week, McCall got sharper. He called out US Steel for a “pompous” attitude, criticizing the company for not giving the union advance notice of the deal. And shortly before New Year’s, he chastised Nippon for having sent a representative to his office to simply read from a pre-written script of how the company would honor labor agreements.
By January, he was on the full offensive. Across a wide-ranging 90-minute conversation on the fifth floor of the USW office in Washington, McCall claimed Nippon had no understanding of the full commitments needed by the labor group and said the company had handled everything “arrogantly.”
By late February, he was livid.
“I want to kill this deal,” McCall said in a phone interview. “They haven’t indicated in any way that they’re interested in working with us to assure us that our members and our members’ futures, their employment security, their economic security and their retirement security is guaranteed. The only progress is on an NDA.”
And when pressed on whether he’d still want to kill the deal even if Nippon meets all the union’s demands, McCall first takes a long pause before answering: “It’s a question I can’t answer, unless they’re willing to sit down and talk about the issues.”
Still, at this point, fiery rhetoric works in McCall’s favor. The angrier he seems, the more leverage he has when it comes to sitting down for negotiations. It’s in Nippon’s interest to try to win the union’s favor quickly.
Trump wants to block
Trump has already said that he would block Nippon’s takeover of US Steel “instantaneously.” “We saved the steel industry. Now, US Steel is being bought by Japan. So terrible, but yeah, we want to bring jobs back to the country,” Trump said in late January.
Members of Congress in both parties have also raised national security concerns, including because of the Japanese steelmaker’s exposure to China.
And in response to questions about the deal, top economic aides for Biden said the president aims to preserve union jobs and domestic manufacturing in the US steel sector. The comments publicly hint at the administration’s priorities and the potential scope of the CFIUS review and further highlight why winning over the union will help to smooth over the political process for Nippon.
In recent weeks, people familiar with the matter have said the US national security review of the takeover is unlikely to conclude until late this year. US Steel and Nippon have publicly stated that they still expect the deal to close by the second or third quarter.
The CFIUS panel, led by Treasury Secretary Janet Yellen, can approve, amend or block the deal on national security grounds — or send it to Biden’s desk for a decision.
The Treasury Department declined to comment.
In a statement, US Steel said: “We respect and appreciate the professionalism of the CFIUS process and the important work of the Committee. We are committed to working with the appropriate parties to ensure any national security concerns are addressed.”
The company also cited Japan as an “important ally” of the US.
Right-Hand Man
McCall became the union’s top official in September, following the death of former president Tom Conway.
McCall was Conway’s right-hand man, who would lay the advance ground work with company officials before top executives and union bosses would gather. Insiders have long viewed McCall as the shrewd negotiator who did the work to secure critical benefits and wage increases.
It’s unclear whether McCall will really follow through on his threats to try and kill the deal. Nippon has, after all, signalled to investors that it will do what’s needed to get the CFIUS approval.
And though the current political moment means McCall currently has a great amount of leverage, that clout will most likely fade after the November election. While US union strength has grown, it’s also true that even the most iconic labor groups, like the USW and the UAW, have seen their ranks plummet from the heydays half a century ago.
So scuttling the deal, only to leave the fate of the workers to the next bidder for US Steel during a less politically ripe moment, may not be the best strategy.
“There is sort of the middle-of-the-road outcome between letting the deal go untouched and blocking it — and that is mitigation to the extent that keeping these strategically important manufacturing jobs in the US is a national security interest,” Sofield of Debevoise & Plimpton said of what could happen during the CFIUS review. “You don’t have to block the deal to make that happen.”
But there is also a personal element to all this that goes beyond the politics.
McCall got his start in the industry at Bethlehem Steel in 1970 at the age of 18 as a journeyman millright. In 1978, he met Conway, at the time a young, unknown Protestant steelworker — an irony to McCall, who’s a Catholic.
Days after Conway’s death, just as McCall was starting to take up the responsibilities of running the union, he had a call with US Steel Chief Executive Officer David Burritt that would set the tone for the relationship he’s had with the company, and now by proxy, with Nippon.
“He said: ‘I hope our relationship can be better than it was with Tom. I didn’t get along with Tom, but I respected his mission,” McCall said. “My best friend in the world passed away and all he could say was he respected his mission.”