By Jerry Burnes/Iron Range Today

Lourenco Goncalves, the outspoken chairman, president and chief executive of Cleveland-Cliffs, was in vintage form during the company’s first public, off-the-cuff comments since it lost a bid to buy U.S. Steel on Dec. 18, 2023.

When he cut to the chase: Cliffs has stayed ready to disrupt the sale of the once-titan of American industry to a foreign buyer.

Goncalves and Celso Goncalves, executive vice president and chief financial officer of Cliffs, spent much of the year-end earnings call outlining what they perceived as underappreciated risks taken by the U.S. Steel board when it agreed to sell to Japan’s Nippon Steel, most prominently an uncertain path through the U.S. political waters and the opposition of the United Steelworkers (USW).

Disdain between Cliffs and U.S. Steel has simmered in recent years and hit an inflection point last year when Goncalves made an unsolicited offer to buy U.S. Steel, with support of the USW, and hinted at the possibility of a hostile takeover of the board.

The heat on the rivalry has been turned up ever since.

“A deal is only a done deal when it closes,” Celso Goncalves said. “They have a very uncertain path to close. Their saga is not over.”

While Cliffs was conciliatory in its prepared statement after U.S. Steel announced the sale, behind the scenes was a different story.

On Jan. 3, the company appointed Ron Bloom to its board of directors. Bloom successfully helped USW use its successorship rights in a labor agreement to block the sale of Wheeling-Pittsburgh Steel to a foreign buyer in 2007. USW tried leveraging its labor deal with U.S. Steel to force a sale to Cliffs, but U.S. Steel leadership argued the union didn’t have the rights to block a sale and proceeded to entertain other bids.

U.S. Steel and Nippon both said the labor agreement with USW would be honored through the sale process, but it nonetheless opened the door for scrutiny and questions over the future of American jobs from the union and politicians alike.

Battles between U.S. Steel and the union are nearly as old as the steel industry itself, and industry sources said the sale triggered an intensified effort by the Steelworkers to prevail one final time and allow a more union-friendly company into the fold.

Cliffs has a built a close bond with the Steelworkers over the past decade that’s defied the historical record on company-union relations in the steel industry.

Representatives of USW’s Iron Range locals have pointed to how the company has handled labor negotiations and fought to keep hundreds of jobs from closing with Hibbing Taconite. Lourenco Goncalves said Cliffs is committed to the workers and growing American jobs, and told investors a sale to Cliffs would not result in any job cuts.

“[The U.S. Steel] management team and that board had one goal in mind and that was to break the back of the United Steelworkers and break the back of organized labor in the United States,” he said on the earnings call, specifically calling out rival CEO David Burritt. “These type of people need to go.”

In a proxy statement filed on Jan. 24, U.S. Steel outlined its rationale on the Nippon agreement, including its calculation on pricing and regulatory hurdles.

U.S. Steel ultimately agreed to Nippon’s all-cash offer of $55 per share as opposed to the Cliffs offer of $54 per share, though Celso Goncalves told investors that the potential value in synergies made the company’s offer closer to $60 per share.

U.S. Steel said Nippon did not require shareholder approval as opposed to Cliffs and pointed to a merger of the two U.S. companies as reducing competition in supplying steel to auto manufactures. Automakers had cited competition as their primary reason for opposing the Cliffs deal.

Similarly, U.S. Steel said Nippon would have to go through a Committee on Foreign Investment in the United States (CFIUS) review of national security implications, and it expected a review of antitrust issues from the Department of Justice if it merged with Cliffs. The company ultimately felt the CFIUS review would be less rigorous.

“A transaction with [Cleveland-Cliffs] would eliminate the sole new competitor in non-grain-oriented steel production in North America as well as eliminate a competitive threat to [Cleveland-Cliffs’s] incumbent position in the U.S., and put up to 95% of iron ore production in the U.S. under the control of a single company,” it wrote in the proxy statement.

Cliffs believes U.S. Steel miscalculated.

Lourenco Goncalves pointed to the support of steel-state lawmakers from the “left, right and center” in Congress, and the Biden Administration, in keeping U.S. Steel as an American-held company. This is expected to be more important during an intense 2024 election cycle, where saving American jobs could provide a necessary boost at the polls, and especially so for a Biden campaign looking to win back blue collar union workers.

“They rightfully see this transaction with Nippon as bad for America and bad for American workers,” Goncalves said, cheekily referring to the bipartisanship as a “miracle.” He added that the “mistake will be fixed, hopefully earlier than later.”

Industry sources with knowledge of the sale process told Iron Range Today last year that it was likely regulatory hurdles for Cliffs to acquire U.S. Steel were in the works soon after the initial bid was made in August, and suggested the company would agree to sell some assets as part of a merger.

Goncalves told investors that the framework of an antitrust agreement involved a “package of commitments” for Cliffs to sell pellets to other companies and maintain supply agreements, as well as divesting “about $2 billion” in revenue.

“We’re very, very confident on what we had done and the homework we did,” he added.

Still, Nippon and U.S. Steel are moving forward with the proposed sale and hope to close on a deal in the second or third quarter of this year. U.S. Steel said it considered the sale a “low-level risk.” Reuters recently reported that Nippon has lined up three large banks for a $16 billion loan to complete the purchase.

U.S. Steel will release its year-end earnings on a Feb. 1 but without a conference call.

This story was updated at 6:15 p.m. to reflect that U.S. Steel is not holding an earnings call.