It wasn’t too long ago that Great Britain could claim no British-owned automakers of note. Was this a signal of the disappearance of auto manufacturing in the country that gave us Aston Martin, Jaguar, and Rolls-Royce? Quite the opposite. Amid a decline of direct-British ownership of carmakers came a surge in auto production within Great Britain.
It’s just a reminder that neither bankruptcy nor buyouts signal the vanishing of businesses as much as they signal the happy, pro-employee and pro-business scenario of physical and human capital being shifted into the hands of more capable stewards. Applied to Great Britain, it’s a huge market for automobiles, it’s a hub for European automobile manufacturing, and the combination means the British buying public has all manner of top brands lined up to sell them cars that are frequently produced in Great Britain.
Sticking with autos, it was not infrequently asserted back in 2008 that if GM and Chrysler were allowed to go bankrupt, that two thirds of the U.S. automobile market would vanish. The assertion wasn’t serious. Consider all the great brands owned by GM and Chrysler. Neither was going to disappear, nor would the brand names disappear as much as the existence of both would have been perpetuated by better management, including possibly foreign management. If so, good. See Great Britain above if there’s some uncertainty.
If not, it’s useful to pivot to steel production in the United States. At present, Tokyo-based Nippon Steel is in the process of trying to purchase Pittsburgh-based U.S. Steel. Perhaps unsurprisingly, the acquisition of the once formidable American giant has the political class up in arms. Supposedly Japanese ownership of the prosaic but essential input threatens U.S. access to the input, not to mention the alleged national security implications related to foreign ownership of one of the foremost American steel companies. The protests are overdone.
If we ignore that U.S. Steel has shareholders, and that its shareholders should solely be making the decision about whether or not to sell to Nippon, we can’t ignore that this is much ado about nothing. Indeed, while U.S. Steel was surely the Apple, Microsoft or Nvidia of its time, at present it’s not even the most valuable U.S.-based steel company. Nucor takes the prize in terms of valuation, and it’s not even close.
Second, Nippon isn’t offering $14 billion for U.S. Steel so that it can make the business vanish, rather it’s paying $14 billion so that it can access U.S. Steel's assets and market share, of which a substantial amount is in the United States. No investment bank would finance Nippon’s purchase, nor would Nippon’s board allow a purchase of U.S. Steel unless it had ambitious plans for the former giant.
Of course, former giant looms large here. While U.S. Steel was yet again the Apple, Microsoft or Nvidia of its time, the fact that it can be had for $14 billion is a loud market signal that it’s no longer the commercial force of nature that it once was. In which case, American politicians, workers, and potential customers should be cheering any acquisition that would place U.S. Steel in more effective, expansionary hands. If the goal is a vibrant steel industry stateside, then the logical answer is management with aims for U.S. Steel well beyond its $14 billion present.
National security? Let’s be serious. Short of foreign producers ceasing sales altogether, there’s quite simply no way for foreign producers of anything (this includes steel, oil, and computer chips) to keep their production from reaching the United States. If you’re producing, you’re trading with the whole world whether you want to or not. Second, Nippon’s acquisition doesn’t signal the taking of U.S.-produced steel as much as it signals enhanced production of steel within the United States. In other words, if you want to keep the U.S. in steel, allow Nippon’s acquisition of U.S. Steel to sail through.
