Cyberattack Cripples Auto Dealership Operations Across North America
A hand-written contract for a new car purchase, prolonged wait times for essential replacement parts, and indefinite delivery dates for eagerly anticipated vehicles – these are just a few of the consequences that auto dealerships and their customers from the United States to Canada are grappling with in the wake of a severe cyberattack on CDK Global.
CDK Global, a software provider instrumental to around 15,000 dealerships, has been reeling since June 19 when the first attack began. This initial assault has taken an enormous toll on an industry that amassed over $1.2 trillion in sales in the U.S. alone last year. Unfortunately, a second cyber incident on Thursday threatens to extend the dysfunction for several more days.
The Heart of Dealership Operations: Dealer Management Systems
CDK’s flagship software suite, known as the Dealer Management System (DMS), is the backbone of nearly every task that an auto dealer performs daily. From organizing financing and insurance to managing vehicle and parts inventory and completing sales and repairs – CDK’s tools are indispensable.
Years of industry consolidation mean that dealerships are now highly dependent on a few DMS providers. This leaves thousands of auto retailers with extremely limited alternatives.
Market Reaction and Financial Repercussions
In the wake of the cyberattacks on CDK Global, the stock market felt the tremors almost immediately. Brookfield Business Partners, CDK’s parent company, saw its shares tumble by 5.7%, marking the worst trading day since October. The impact also reverberated through automobile franchises. AutoNation witnessed a 3.6% decline, while other major dealership groups like Group 1 Automotive, Sonic Automotive, and Lithia Motors didn’t escape unscathed.
Real-World Impacts: Customer Frustration and Business Standstill
For Joshua Adams, a Jeep owner from Millbrook, Alabama, the timing couldn’t be worse. He’s already been without his vehicle for several weeks, waiting for a warranty part. When he recently called the dealership to check on the status, he was met with the frustrating news that they couldn’t provide any information due to the hack.
"They won’t tell me where the parts are or when they’re going to arrive," Adams expressed, adding that the delays could end up costing him hundreds more in rental car fees.
Similarly, the Lani family from New Jersey encountered unexpected challenges. Daniel Lani and his wife were set to take delivery of their new Audi Q5. However, on June 19, they received a call from the dealership informing them that the store’s computer system was down and the arrival of their new car was uncertain.
"The kids were really excited," lamented Lani, a 41-year-old real estate broker. "They were upset, and now they ask me about it on a regular basis."
Dealership Operations Grind to a Halt
Alex Padron, a sales manager at a Nissan dealership in Phoenix, described the situation as being at "pretty much a standstill." The dealership has stored data on over 50,000 customers since adopting CDK’s software in 2014. The loss of access to this data has forced them to revert to manual processes, including writing paper contracts by hand.
"We’re having to guess about customers’ creditworthiness based on all the information we can gather," Padron noted. Complex transactions involving trade-ins or unusual financing have become nearly impossible to process under the current conditions.
Typically, Padron aims to close 10 transactions daily. However, he’s now content if they can manage five to seven, given the constraints placed on them by the cyberattack.
Looking Ahead
The ripple effects of the cyberattack on CDK Global spotlight the critical role that technology plays in modern automotive retail and the vulnerabilities inherent in such dependencies. As dealerships scramble to adapt to archaic methods temporarily and customers remain in limbo, the incident raises pressing questions about cybersecurity measures and contingency planning for essential service providers.
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Lawrence Jacobs, Editor of Automotive.fyi
