(Bloomberg) -- The United Steelworkers and Nippon Steel Corp. are staking out bargaining positions for a deal that would potentially smooth the purchase of United States Steel Corp. — a key test of whether the union will ultimately back the deal and clear the way for the Biden administration to approve it.

Union leader David McCall is now explicitly outlining what it will take for the union to get a deal done: An in-writing, legal agreement that Nippon will honor all its labor contracts. 

Nippon seems to be falling short of that demand, at least for now. A document seen by Bloomberg News details what Nippon put on the the table during a discussion last week with the union. While the Japanese company offered at least $1.4 billion in new capital spending and has said it intends to uphold the agreements, it has yet to modify its public plan of merger with the assumption of the labor contracts — a key step the union is seeking. 

“As far as I’m concerned, all that’s gone on here, all it tells me, is our caution — our concern — from the beginning is more than justified,” McCall said in a telephone interview. 

Read More: US Steel Takeover’s Fate May Hang on the Words of a Union Boss

Thanks to a growing political maelstrom that’s thrust the American steelworker into the center of campaign rhetoric, McCall is now one of the most crucial voices that can help decide the fate of Nippon Steel’s proposed $14 billion takeover. Shares of US Steel rose more than 5% in after-hours trading after Bloomberg News reported McCall’s comments and details of the document.

Biden’s Union Support

President Joe Biden is expected to soon release a statement of concern about the deal, the latest show of support from the administration for the steel union as it seeks to win better terms. US Steel shares tumbled on the news Wednesday. The stock dropped as much as 15%, the biggest intraday loss since June 2020. 

Nippon Steel said in a Feb. 13 letter to McCall and USW Negotiating Committee Chair Michael Millsap that the parent company for US Steel would assume the labor agreements. The statement was meant to allay concerns by the union that the subsidiary set up to house the American company post-deal would assume the agreements. 

A spokesman for Nippon Steel on Wednesday reiterated the company’s commitment to assume all of the existing USW agreements, including the basic labor agreement, pension, health and welfare plans. The spokesman said the commitments would be “memorialized in legally binding documents once an agreement with the USW is reached.”

Read More: US Steel Falls as Biden Weighs Statement of Concern on Deal 

“They say stuff in the press about how they’re assuming the labor agreements — but they aren’t,” McCall said, adding that a written, binding assurance from Nippon on the agreements is the most important measure the union is looking for before continuing further discussions. 

Political Leverage

The union doesn’t have any official right to simply block an offer US Steel has accepted, but it holds unique political leverage. 

Biden’s administration has regularly sent warnings about the deal and has steadfastly sided with the USW over the sale of a once-iconic firm based in Pennsylvania, a crucial swing state. So far, the White House has stopped short of calling for the deal to be blocked. 

Politics hang over the administration’s considerations, with Donald Trump pledging to block the deal outright.

The Nippon bid for US Steel is up for review by the Committee on Foreign Investment in the United States, or Cfius, a process shrouded in secrecy. Allies of Biden have urged the administration to kill the deal over national security concerns — despite Japan being a close ally — and the threat to unionized steel jobs.

Read More: US Steel Review Seen to Last Year or More, Defying Forecasts

The Japanese steelmaker is offering at least $1.4 billion in capital expenditures on existing plants run by union workers from 2024 to 2026, a commitment not to lay off any steelworkers through Sept. 1, 2026 — when the existing labor agreement ends — and a commitment to not idle or permanently close any plants through the same period, the meeting document seen by Bloomberg showed. That’s among other promises made to the union effective as of the closing of the acquisition, the document showed.

Union Letter

In a letter addressed to Nippon’s Executive Vice President Takahiro Mori that was dated March 11, McCall criticized the company’s lack of commitment during the meeting to spell out the parent company’s promise to assume the labor agreements with the union. 

“Plainly, NSC’s currently expressed intent to guarantee or indemnify against future obligations is not consistent with its written promise to USW and US Steel to ‘assume all USW agreements,’ and thus NSC’s expressed intent falls grievously short of constituting an assumption,” the letter said. “USW will continue strongly to oppose Nippon’s proposed acquisition of US Steel in light of these failings.”

Nippon’s meeting document said the parent company would assume all agreements between the union and US Steel, “in the highly unlikely event of default by both US Steel and Nippon Steel North America Inc.,” which is the Nippon subsidiary. 

McCall in the phone interview emphasized that these agreements must be met before the union can move to a second step in the negotiations.

“I hope they read the letter and hope they decide they need to figure out something different,” he said. 

(Updates with US Steel after-hours share movement, in the fifth paragraph.)

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