What happened
The strike called by the United Auto Workers (UAW) looks set to expand, and that's hardly good news for any business anywhere near the vehicle industry. Investors are clearly worried about the damaging effects of a wider shutdown throughout the sector. As a result, on Thursday stocks in various auto segments were hit with gloomy sentiment.
These included next-generation electric vehicle (EV) maker Fisker (FSRN), which fell by over 2% on the day, battery maker QuantumScape (QS -3.65%), and LiDAR specialist Innoviz Technologies (INVZ -5.61%), with declines of 5% and nearly 6%, respectively.
So what
The UAW and representatives from the U.S. auto industry's "Big Three" -- General Motors, Ford, and Stellantis -- held talks on the stoppage Thursday. As of late afternoon, though, it didn't seem as if there'd be any breakthrough to report.
Meanwhile, a deadline looms: This past Monday UAW president Shawn Fain said that if significant progress were not made in the talks by Friday at noon, more union members would be called upon to join the protest.
At first, only the three incumbent manufacturers are directly affected by the strike. Very deliberately, the UAW chose to strike at one factory apiece operated by the trio when the protest launched last Friday.
Since then, 190 UAW members went on strike at a Mercedes axle supplier in Alabama. If that coming Friday noon deadline isn't met, other facilities throughout the country will surely be affected -- and sooner rather than later.
The more cutting-edge vehicle companies and suppliers aren't directly affected by this, but as they drive on the same freeway as the incumbents, they're getting at least some blowback. Snowballing production shutdowns will hit parts suppliers hard; even many next-generation ones depend to some degree on commerce from the majors.
And if they're battered by the work stoppage, then by extension EV makers and other alt-fuel vehicle makers will be too. Despite the growing popularity of EVs, there's little a manfacturer can do when the rest of its industry sputters toward a complete halt.
Now what
It feels almost a certainty that the strike will drag on. Persistently low unemployment and a still-thriving economy helping to boost vehicle companies' fundamentals is a combination that gives the UAW a strong negotiating stance. But the incumbent car makers, at least, have traditionally been quite slow to compromise, even when in such a position.
Barring a sudden and surprising leap in progress between the two sides in the talks, then, auto stock investors should be prepared for more intransigence and, deriving from that, more bearishness throughout the sector.