Understanding the Cultural Impact of Nippon’s Acquisition of U.S. Steel

Article by Shinichiro (SHIN) Nakamura, President of one to ONE Holdings

Nippon Steel’s proposed $15 billion acquisition of U.S. Steel has caused a huge uproar not only in the industry but in wider politics, with President Biden stepping in to block the agreement and President-elect Donald Trump vocalizing his opposition to the deal, with the widely echoed sentiment that it’s “vital for U.S. Steel to remain American-owned.”

However, regardless of these political alarm bells, there’s a compelling business case for the merger to go through: This acquisition is widely heralded as a crucial move to save U.S. Steel, which has been unprofitable for the past 15 years and is described as “a shell of its former self.”

While there’s no doubt that U.S. Steel faces great profit peril, there’s still huge backlash from United Steelworkers (USW), the largest steelworker’s union in the US that has over 1.2 million working and retired members. 

Crucially, beyond the hardline business benefits of the deal, Nippon arguably brings much-needed changes to the cultural side of operations, including how leadership interacts with unions. It’s important to hone in on these aspects and understand what a Japanese influence may look like for the US steel industry’s workforce and why it could make or break the US steel industry’s future. 

USW’s Outrage

A couple of months ago, USW lost its arbitration case, where it attempted to bring the acquisition to a screeching halt. The case signals the union’s mistrust in Nippon’s leadership, vocalizing huge concerns over its ability to commit to steelworkers (including retirees and communities), the enforcement of labor agreements, financial transparency, and wider implications for national defense, infrastructure and supply chains. 

According to USW, jobs and communities are hanging in the balance in light of the merger. Although Japan has been a long-standing ally of the US, there are still doubts from union members and American government officials alike regarding how the Japanese-based steel company will run operations and what this means for steelmaking in the US. 

Yet, there are those vocalizing their support for the merger, such as steelworkers whose families have historically relied on U.S. Steel for work in Pittsburgh. They ultimately believe that while it may be more politically favorable to prevent it from taking place, the deal promises greater financial stability for smaller regions in the US, particularly in Pennsylvania.

Cultural differences around employment

The widespread concerns are entirely valid, especially considering the clear cultural differences between both countries, which can exacerbate significant shifts in work dynamics even more. However, they do not acknowledge the modus operandi of Japanese corporate culture, which will have major implications on employee management in U.S. Steel moving forward.

For instance, Japan is widely renowned for its embedded culture of lifetime employment, particularly in the manufacturing industry in rural areas. In fact, the average employment tenure is 12.3 years versus 3.9 years in the US. As a result, Japanese companies tend to invest heavily in employee training and development, and preserving employment is seen as the company’s responsibility in Japan’s business culture. 

Not only that, but the labor law market in Japan is notoriously tough on employers terminating employment contracts, and reasons for doing so have to be very clearly justified. These include financial downturns, which require downsizing, failure to fulfill work responsibilities, and corporate dissolution. The Japanese government introduced the Labor Tribunal Act to ensure a well-structured process for challenging dismissals between employers and employees. 

Conversely, laws around termination of employment are significantly different in the US. While legal reasons for termination are similar to those in Japan, workers aren’t as widely protected by a notice period: In fact, it’s quite common for employees to be laid off without notice. 

Regardless of the potential advantages and disadvantages of the acquisition, it’s important to keep in mind that the US steel industry is one of the oldest industries in the country. This means that any changes introduced will inevitably cause disruptions to the landscape, but that’s not to say some don’t come with long-term benefits for the industry as a whole. 

Understanding the role of unions 

Pushback from the USW has been a significant factor in halting the acquisition. There’s emphasized concern around potentially drastic changes to the US steel industry wreaking havoc on steelworkers and connected communities, but it’s worth considering Japanese union dynamics and how these could bring about positive changes for the better.

The presence of unions has not only been decreasing over the past 50 years in Japan, but their purpose and structure have evolved too. In Japan, there is a much stronger culture of close collaboration between management and unions, as opposed to resorting to strikes to overcome differences, which is more common in the US.   

That collaboration versus confrontation in Japan underpins the longstanding tradition of how unions operate. This is what has led to phenomena like the Shuntō system, where unions negotiate for wage increases on an annual basis in the spring. 

Stronger consensus, collaboration, and greater security for workers are intensely fostered in the Japanese union culture. Once the U.S. Steel acquisition is finalized,  these practices could be noticed, analyzed, and synthesized into US-based factory management. 

A Japanese influence via the acquisition could strengthen the synergy between unions and management through this collaborative-first approach common to Japanese unions. The implications of the merger in terms of corporate culture could manifest in a higher emphasis on training and development for maximizing employment tenure, given this is the norm in Japanese businesses. Finally, enhanced job security due to a focus on retaining and developing existing talent could be another strong possibility.

Understanding the cultural implications of introducing Japanese management to the US steel industry’s biggest player will help pave the way for more trust in the future. While there are wider concerns around pressing challenges like supply chains and trade implications, building trust through a collaborative approach that prioritizes the workforce’s security is key. With the acquisition, it’s likely that Nippon Steel will prioritize employment tenure and fostering that culture of cooperation with unions.