Cyberattack on CDK Global Causes Havoc at Dealerships
Have you recently faced difficulties purchasing a car at a dealership or scheduling car servicing? If so, the root cause might be a significant cyberattack on CDK Global, a pivotal software provider for numerous dealerships and service centers across North America. The cyber incident, which occurred on June 19, has left dealerships grappling with operational disruptions and a return to pre-digital age practices.
What is CDK Global?
CDK Global, headquartered in Hoffman Estates, Illinois, operates in over 15,000 retail locations across North America. The company provides a dealer management system (DMS) that is essential for various dealership operations, including transaction processing, financing arrangements, parts tracking, and customer relationship management. CDK Global was acquired in 2023 by Brookfield Business Partners for approximately $6.5 billion.
The Cyberattack Unveiled
CDK Global confirmed a cyberattack after dealerships in Canada and the U.S. reported widespread system outages. The company stated they were experiencing a cyber incident and were working on recovery processes, which could take several days. The shift back to manual, paper-based transactions has significantly hampered dealerships’ day-to-day operations, creating accounting challenges and poor customer experiences, especially during peak business season.
The perpetrators, reportedly an Eastern European group called the "Black Suits," are demanding a ransom to restore services. The attack has already had a financial impact, with shares of CDK Global’s parent company dropping by 5.7% following reports of a second hacking attempt during service restoration efforts.
The Impact on Dealers and Customers
The ripple effects of the cyberattack are felt strongly at the retail level. Customers are experiencing delays in purchasing and servicing their vehicles. For instance, some car owners cannot collect their vehicles from service departments because repair orders cannot be finalized without functioning systems. This delay is exacerbated by legal requirements that prevent dealerships from releasing cars without completed repair orders.
Major auto retailers like AutoNation and Lithia Motors are mitigating the situation by switching to manual processes. AutoNation, the largest U.S. dealer group by sales, acknowledged disruptions but maintained business operations through alternative methods. Lithia Motors echoed similar concerns, emphasizing the strained operations but uncertain financial impact.
Group 1 Automotive, operating over 200 dealerships, also shifted to alternative processes while assessing the full scope of the incident’s impact. The longer the outage persists, the more significant the operational and financial strain on dealerships.
What’s Next for CDK Global?
The cyberattack has strained the relationship between CDK Global and its dealership clients. Many dealers are considering switching to alternative DMS providers such as SAP, Reynolds & Reynolds, or Dominion Enterprises due to the perceived mishandling of the crisis by CDK Global. Dealers have voiced frustrations over the lack of clear communication and insufficient solutions during the incident.
Stuart McCallum from motor accounting firm Witham highlighted that consumer experiences during car purchases can leave lasting impressions, potentially driving them to unaffected dealerships. Dealerships themselves are taking drastic measures, such as halting the offering of leases due to manual calculation difficulties.
The incident has come at a particularly inopportune time, coinciding with the end of the month and the quarter, crucial periods for hitting sales targets. The next updates from automakers regarding second-quarter production and delivery totals will be closely scrutinized by analysts and investors, considering the disruptions caused by the CDK Global cyberattack.
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Lawrence Jacobs, Editor of Automotive.fyi
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