CDK Global Cyberattack: Dealerships on Path to Recovery, but Sales Impact Lingers
The recent cyberattack on CDK Global, a leading provider of software solutions to automotive dealerships, has severely disrupted operations across North America. Although progress is being made towards restoring services, the financial repercussions in terms of lost sales and service revenue are expected to be significant.
Progress Towards Resolution
CDK Global, which experienced a crippling cyberattack starting on June 19, announced on Wednesday night that it has made initial strides towards restoring its Dealer Management System (DMS). The company stated, “We have successfully brought a small initial test group of dealers live on the Dealer Management System (DMS), and once validation is complete, we will begin phasing in other dealers. We are also actively working to bring live additional applications — including our Customer Relationship Management (CRM) and Service solutions — and our Customer Care channels.”
This marks the first positive update from CDK Global since the onset of the cyberattack. The company had previously attempted to restore services but faced a second attack, complicating recovery efforts. The attackers, identified as the BlackSuit group from Eastern Europe, reportedly demanded a ransom in the tens of millions of dollars. CDK Global has not confirmed whether any ransom was paid, declining to comment on the matter.
Impact on Dealerships and Sales
While the staged rollout of the DMS is a hopeful sign, the disruption has already taken a toll on dealerships. Major public auto dealership groups such as AutoNation, Group 1 Automotive, and Lithia Motors have indicated that their second-quarter financial results will likely reflect the impact of the outage. Some dealerships resorted to manual methods, including pen and paper, to document sales and services during the downtime.
One service center in Illinois has filed a lawsuit against CDK Global for lost business due to the cyberattack. Other Dealer Management System operators, such as Dominion, have reported that automakers are conducting audits of their software to assess cybersecurity effectiveness.
Sales Projections and Economic Impact
The cyberattack has disrupted dealership operations for over a week, leading automotive research firms to project a decline in June and second-quarter sales. Thomas King, president of data and analytics at JD Power, stated, “Because of the disruption to dealer software systems, June sales will not be reflective of actual consumer demand for new vehicles. Instead, a significant number of sales that would have occurred in June are now likely to occur in July.”
JD Power forecasts that June sales will fall from an initial projection of 1.41 million units to between 1.27 and 1.33 million units, representing a 2.6% to 7.2% decrease compared to the previous year. While some of these lost sales might shift to July, the slow sales period in June could affect overall second-quarter performance for both dealership groups and automakers. The end of June is typically a robust sales period, making the timing of the cyberattack particularly detrimental.
Industry Reactions
Jessica Caldwell, head of insights at Edmunds, commented on the situation, saying, “The CDK cyberattacks have thrown a monkey wrench into sales during the second half of June, affecting what is arguably one of the most lucrative and busiest times of the month and quarter for dealerships. Although the impact of these attacks will be different from dealer to dealer, this event is another speed bump on the automotive industry’s long road to recovery.”
Despite challenges such as high interest rates, the automotive industry had anticipated strong Q2 sales due to improved inventory levels and summertime incentives. Both JD Power and Edmunds now expect some sales to shift to Q3, potentially mitigating overall losses.
Looking Ahead
As Q2 earnings season approaches next month, investors and industry analysts will gain a clearer understanding of the cyberattack’s impact on dealership sales and overall quarterly deliveries for major automakers like Ford, GM, and Toyota. The extent of the financial damage and the effectiveness of CDK Global’s recovery efforts will be closely scrutinized.
In conclusion, while CDK Global is making progress in restoring its systems, the ripple effects of the cyberattack on dealership operations and sales will be felt in the coming months. The automotive industry, already navigating a complex recovery landscape, faces yet another challenge in the aftermath of this significant cybersecurity breach.
