Cleveland-Cliffs Comments on U.S. Steel’s and Nippon Steel’s Desperate Lawsuits: Deflecting Blame on Everyone Else for their Own Mistakes

Rhea-AI Summary

Cleveland-Cliffs (NYSE: CLF) has responded to lawsuits filed by U.S. Steel and Nippon Steel following the U.S. Government's decision to block Nippon Steel's acquisition of U.S. Steel. CEO Lourenco Goncalves characterized these lawsuits against the U.S. Government, USW, and Cleveland-Cliffs as a desperate attempt to deflect blame for their failed deal.

The deal faced significant bipartisan opposition, including from former President Trump and Senators Vance, Rubio, and Hawley, who urged CFIUS to block the sale. The President's final decision followed a year-long national security review, emphasizing the importance of maintaining American control over critical steelmaking infrastructure. The statement highlighted Japan's history of steel overcapacity and harmful dumping practices in the United States.

Notably, U.S. Steel CEO David Burritt sold personal stock at $50.01 on the deal's announcement day, December 18, 2023. Cleveland-Cliffs maintains the lawsuit is baseless and expressed readiness to defend their position in court.

Insights

Legal Expert

The lawsuits filed by U.S. Steel and Nippon Steel against multiple parties, including the U.S. Government and Cleveland-Cliffs, represent a significant legal development in the aftermath of the blocked 14.1 billion acquisition deal. From a legal perspective, these suits face substantial hurdles, particularly when challenging executive decisions based on national security grounds under CFIUS review. The bipartisan opposition and presidential intervention create a robust legal foundation for the deal's rejection.

The mention of CEO David Burritt's stock sale at 50.01 on the deal announcement date raises potential securities law implications. This transaction could attract regulatory scrutiny, especially in the context of the deal's ultimate failure. The litigation strategy appears defensive rather than merit-based, aimed at deflecting shareholder disappointment rather than presenting viable legal arguments against the government's national security determination.

Trade Policy Analyst

This dispute illuminates critical trade policy dynamics between the U.S. and Japan. Japan's historical pattern of steel overcapacity and dumping practices provides context for the government's intervention. The bipartisan congressional opposition, citing concerns about foreign exploitation of U.S. trade protections, reflects a broader shift in American industrial policy.

The blocked acquisition signals a hardening stance on foreign control of strategic industrial assets, particularly in steel production. This development could reshape future cross-border M&A in critical sectors, potentially benefiting domestic players like Cleveland-Cliffs. The emphasis on maintaining American control over steelmaking infrastructure suggests a continuing trend toward economic nationalism in core industrial sectors.

Market Research Analyst

For Cleveland-Cliffs (CLF), this outcome strengthens its competitive position in the domestic steel market. The blocked deal eliminates the threat of a stronger competitor emerging from the U.S. Steel-Nippon combination. With a market cap of 4.6 billion, CLF stands to benefit from continued trade protections and domestic market focus.

The failed transaction creates potential market opportunities for CLF, possibly including future consolidation possibilities. U.S. Steel's vulnerability following this failed deal could lead to renewed domestic M&A discussions. Investors should monitor CLF's strategic positioning as the domestic steel industry landscape continues to evolve under heightened national security scrutiny of foreign investments.

CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) (“Cliffs”) provided the following statement regarding the recent developments related to the United States Government decision to prohibit the unlawful acquisition of the United States Steel Corporation by Nippon Steel of Japan:

Lourenco Goncalves, Chairman, President and CEO stated: “As of this morning, Nippon Steel and U.S. Steel continue to play the blame game in a desperate attempt to distract from their own failures. Today’s lawsuits against the U.S. Government, the USW, and Cleveland-Cliffs represent a shameless effort to scapegoat others for U.S. Steel’s and Nippon Steel’s self-inflicted disaster. U.S. Steel’s executives did not get their personal payouts. Now that it is clear that they have miserably failed the very shareholders they always say they work for, they are lashing out with petulance as a result. Once again, bad course of action.

Cleveland-Cliffs and the USW were not the only ones who recognized the adverse national security implications of this acquisition. This deal drew instant bi-partisan opposition, including from President Trump, who has vowed multiple times that he would block the deal. Shortly after the deal was announced, on December 19, 2023, then-Senators J.D. Vance, Marco Rubio and Josh Hawley requested CFIUS to block the sale of U.S. Steel to Nippon Steel, and rightfully indicated that ‘Trade protections can and should induce foreign investment that expands domestic production and creates American jobs[,] [but] [t]his corporate takeover is out of step with those goals. Allowing foreign companies to buy out American companies and enjoy our trade protections subverts the very purpose for which those protections were put in place.’ Vance, Rubio and Hawley followed up with a letter to President Biden on May 9, 2024, urging President Biden to ‘summon the courage to do the right thing. Declare whether you will exercise your presidential authority to prohibit or suspend the sale of U.S. Steel to Nippon.’

The final decision by the President of the United States to block the Nippon deal follows a year-long national security review, and underscores the importance of maintaining American control over our country’s critical steelmaking infrastructure. Even more than China, Japan has a decades-long history of steel overcapacity and harmful steel dumping into the United States. The destruction of good-paying, middle-class jobs in the steel industry can be traced back to the unfair trade practices perpetrated by Nippon Steel. The U.S. Government has properly recognized that granting increasing influence to Nippon Steel via this acquisition is a direct threat to our economy, workforce, infrastructure, and defense, all important elements of national security. Nippon Steel’s overproduction in their home country of Japan is at the root cause of their horrible track record of injurious trade practices in the United States. The risks of not having the deal approved were well recognized, and even David Burritt sold a chunk of his own personal stock at $50.01 on the day of the announcement, December 18, 2023.

U.S. Steel made their bed when they rejected an all-American solution and insisted on pursuing a doomed-to-fail cash out sale to Nippon Steel, a company notorious for evading the trade laws in the United States. Rather than owning up to this colossal error in judgment, U.S. Steel, its CEO David Burritt, and Nippon Steel have opted for finger-pointing and legal theatrics. David Burritt continues to embarrass himself to deeper levels at each step. Their lawsuit is completely baseless. We are well prepared to litigate and look forward to exposing the facts in court.”

About Cleveland-Cliffs Inc.

Cleveland-Cliffs is a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. The Company is vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 30,000 people across its operations in the United States and Canada. For more information, visit http://www.clevelandcliffs.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250106689729/en/

MEDIA CONTACT:

Patricia Persico

Senior Director, Corporate Communications

(216) 694-5316

INVESTOR CONTACT:

James Kerr

Director, Investor Relations

(216) 694-7719

Source: Cleveland-Cliffs Inc.

FAQ

Why did the U.S. Government block Nippon Steel's acquisition of U.S. Steel (CLF)?

The U.S. Government blocked the acquisition following a year-long national security review, citing the importance of maintaining American control over critical steelmaking infrastructure and concerns about Japan's history of steel overcapacity and harmful dumping practices.

What legal action did U.S. Steel and Nippon Steel take after their deal was blocked?

They filed lawsuits against the U.S. Government, the United Steelworkers (USW), and Cleveland-Cliffs (CLF) in response to the blocked acquisition.

Which prominent politicians opposed the Nippon Steel-U.S. Steel deal before it was blocked?

The deal faced bipartisan opposition, including from former President Trump and Senators J.D. Vance, Marco Rubio, and Josh Hawley, who requested CFIUS to block the sale.

What did U.S. Steel CEO David Burritt do on December 18, 2023, regarding CLF stock?

David Burritt sold a portion of his personal stock at $50.01 per share on the day the Nippon Steel deal was announced.