Key Points:
- U.S. Steel is struggling financially and needs a buyer, with Nippon Steel offering a potential solution.
- The Biden administration is likely to block the deal, citing national security concerns.
- Without the buyout, U.S. Steel may face layoffs and closures.
- Smart investors are looking ahead to 2025 and placing bets, with a few being called ‘The Next Nvidia’. See for yourself.
Doug and Lee discuss the challenging situation faced by U.S. Steel Corp. (NYSE: X), a company that has struggled for years. They talk about a potential buyout offer from Nippon Steel, a well-regarded Japanese company, which could have helped revitalize U.S. Steel while keeping its operations in Pittsburgh. However, concerns from the U.S. government, particularly the Biden administration, seem to be blocking the deal due to perceived national security risks. The conversation also touches on the potential involvement of Cleveland-Cliffs Inc. (NYSE: CLF) and the broader implications for U.S. Steel, including possible layoffs and facility closures. They express confusion over the national security concerns and agree that U.S. Steel may face significant trouble without the buyout.
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Edited Video Transcript:
So being in the steel industry in the United States has been rough for decades.
For decades, the Japanese were blamed for this.
Made steel, dumped it in the United States, a lot of fights, tariffs.
You know, what happens is that it’s like the tire business.
You know, a lot of accusations of dumping, but then Bridgestone came in a number of decades ago and they bought Firestone.
So Japanese company buys big American company, and everybody lived happily thereafter.
Except Harvey Firestone, but yep.
Now you’ve got U.S. Steel, which was really a damaged company.
Has been for years.
Comes into the market and says, we’ll buy you, we’ll buy you at a premium.
Seems like a good deal.
They need to find a buyer.
But then guess what?
Uncle Sam gets wind of you know and i i’ve heard really mixed commentary on this and i understand the the pushback but again nippon steel is well run and can help reshape this they’re going to their their offer was to keep us steel in pittsburgh you know keep the offices there and it’s like they were like well you know we’re a little concerned with the adversarial relationship.
It’s like Japan is one of our biggest allies.
They’re not selling it to a Chinese company, you know?
And so, and so I’ve heard, you know, mixed commentary, Larry Kudlow was, was very positive about the deal because he thought it was good for us steel in the employees.
But now it looks like, you know, uh, president Biden is going to put the kibosh on this.
And so now Cleveland cliffs, who was kind of initially part of the conversation, is going to buy part of the assets?
What does that mean?
Does that mean you’re going to break it all up and everybody in Pittsburgh doesn’t have a job?
Well, I was looking at the U.S. steel financials this morning.
And if you take away the buyout, they have a big problem, particularly if there’s even a mini recession, because, you know, shrinking rapidly, net income is like, one tenth of one percent of revenue or something like that.
They’re living on a thin, thin margin.
They’ve got a fair amount of debt.
They don’t have a massive amount of cash.
They’re the kind of company they need a buyer.
Yeah, and they need the cash.
And again, a lot of the, you know, three and four years ago, a lot of the strength in that industry was on the supposed big infrastructure bill that we were going to go through, which ended up not really happening because all of the bills were just big spending bills.
And so now the infrastructure build-out has faded.
And like you said, if we get into a bad economy, which it appears we’re on the verge of going into, you’re right, it could be real difficult.
Well, I’d like to say we should watch this, but I think the Biden administration has made up its mind.
Newspapers say they have made up their mind.
Well, and Donald Trump pushed back against it as well.
Right.
So the deal is dead.
I don’t know that Nippon has another place to go in the United States, but what it means is that U.S. Steel is in trouble.
The CEO said they might have to let some people go, maybe close one of the facilities.
But this is an example of, you know, a lot of people said, well, it was a national security risk, which is, well, I, I, I can see that if it’s like places where they can track you like Tik TOK, but what’s the national security risk with, I don’t, I don’t get that part of it.
I didn’t get it either.
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