A MARTÍNEZ, HOST:
The largest steelmaker in Japan, Nippon Steel, plans to buy U.S. Steel. The American manufacturer was once the world's biggest company. And it was so iconic that in "The Godfather Part II," the character Hyman Roth described the power of the mob like this.
(SOUNDBITE OF FILM, "THE GODFATHER PART II")
LEE STRASBERG: (As Hyman) Michael, we're bigger than U.S. Steel.
MARTÍNEZ: Now, that was nearly 50 years ago, before the company's decline. I have Rutgers University professor of economics Tom Prusa on the line. Professor, so what does this $14 billion deal say about the economic health of America's manufacturing sector?
TOM PRUSA: Actually, ironically, it points to the health of the U.S. steel industry that U.S. Steel's challenge over the last several decades has been a set of very innovative, low-cost U.S. steel producers that have really challenged its traditional dominance. Nucor and Steel Dynamics have been at the forefront of innovation, and that's been a challenge for U.S. Steel.
MARTÍNEZ: So even though they've been lagging behind, so to speak, they can still get that kind of price. Is that what you're saying?
PRUSA: Yes, because they're able, if they can move, to stop directly competing in kind of commodity steel, which is Nucor and Steel Dynamics' breadbasket, and using Nippon Steel's technology and innovation, the set of products they make, to move up the product lines and be able to service higher-end customers more effectively. That's really the Nippon Steel signature.
MARTÍNEZ: Why did U.S. Steel fall behind?
PRUSA: They made a couple of serious mistakes over a series of decades. Early on, they were slow to adopt a movement in the 1960s to blast oxygen furnace technology. And then in the late '80s, early '90s, they were very slow to move into another type of technological innovation called electric arc furnaces. That's the technology that Nucor and Steel Dynamics have mastered. So they've just been a little slow on the uptick. And they've struggled with their size - that is, it's hard for such a large company to be nimble like the small companies.
MARTÍNEZ: Right. Now, Democratic Senator John Fetterman of Pennsylvania used a video filmed from his house that was overlooking a U.S. steel plant to call for the sale as bad for workers. Let's listen to that.
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JOHN FETTERMAN: It's absolutely outrageous that they have sold themselves to a foreign nation and a company.
MARTÍNEZ: Professor, is he right? Will jobs be hurt - U.S. jobs will be hurt by this sale?
PRUSA: So I don't think so. I think he's 100% wrong. So there are challenges for U.S. Steel workers, and those challenges are going to be there at U.S. Steel with or without Nippon Steel's ownership. What's most important for U.S. steel workers, and particularly the ones at U.S. Steel, is that they have companies that will invest and continue to invest in state-of-the-art technology to allow them to be competitive. U.S. Steel's really struggled over the last decade in investments in their firm. They've made a lot of promises that they haven't been able to keep. And I think the hope for the steelworkers is that Nippon will bring much-needed capital into the facilities.
MARTÍNEZ: And U.S. Steel, in their announcement, says that Nippon Steel will honor the union's collective bargaining agreement. So we'll see what happens there. Senator Fetterman also went on to talk about national security. He says steel is always about security, both our national security and the economic security of our steel communities. Any concerns with that, professor?
PRUSA: No. For first of all, the national security arguments related to steel are much overblown. I mean, the actual percentage of steel used in the modern military as a percentage of our production is quite low. So that's a traditional argument made for kind of protectionist reasons, it's certainly not valid. And then, if you take it seriously, Japan is one of the United States' closest allies. And Nippon Steel is a world-class company. It actually benefits U.S. national security to have one of the prized companies in our country revitalized with this joint partnership. In a way, what's happening at U.S. Steel right now is what we've seen over the last 20 years with a number of large steel companies, that is a move to become large, global corporations.
MARTÍNEZ: And quickly, professor, what's in it for Nippon Steel? Why do they want to do this?
PRUSA: It's clearly they want access - better access to the U.S. market. So I think they see a lot of growth opportunities here in the United States with some of the Nippon technology, in particular products that can serve the new emerging electric vehicle market and the renewable energy market more broadly. That's a market that they're going to have a very difficult time accessing from Japan. But with U.S. Steel, they will be able to do that.
MARTÍNEZ: Rutgers University professor Tom Prusa. Thank you.
PRUSA: Thank you. Transcript provided by NPR, Copyright NPR.
