In a surprising throwback to old-school methods, U.S. auto dealers have found themselves reverting to manual paperwork due to a major software outage caused by a cyberattack on CDK Global. This outage has disrupted the dealer management systems (DMS) used by over 15,000 retail locations, critical for processing sales, tracking profitability, and managing employee compensation.
The cyberattack has plunged the automotive retail sector into chaos, with JPMorgan analysts highlighting the severe impact on business operations. Leading auto retailer AutoNation reported significant disruptions, although their outlets remain operational, continuing to buy, sell, and service vehicles despite the challenges.
Similarly, Lithia Motors has also experienced substantial disruptions in its CDK-hosted systems across North America. The company anticipates a negative impact on business until the systems are fully restored, underscoring the severity of the outage.
Jim Seavitt, owner of Village Ford in Dearborn, Michigan, shared that while sales haven’t been significantly affected, the process of delivering vehicles to customers has become more laborious. During a recent large sale, nearly 100 cars were sold, but the necessary paperwork, typically generated by CDK systems, is currently stalled, leaving these transactions in limbo. Seavitt’s team has developed alternative methods to complete the paperwork, hoping for a resolution by mid-week as indicated by CDK.
CDK Global, which announced the outage last week, has commenced the restoration process, but it is expected to take several days to complete. In the meantime, dealerships like AutoNation and Group 1 Automotive are relying on manual paperwork to continue operations, having taken precautionary steps to safeguard their data.
Adding to the complexity, Bloomberg News reported that the cyberattack was orchestrated by a hacking group known as BlackSuit, which has demanded millions in ransom to end the hack. Seavitt expressed hope that CDK might pay the ransom to expedite the return to normal operations.
Analysts have noted the potential risk to U.S. auto sales in late June due to these disruptions. While no direct sales hit has been outlined by auto retailers, the impact of the CDK outage on overall sales volumes remains a concern. Last year, total new vehicle retail sales in the U.S. reached 1.1 million units in June, according to data from J.D. Power and GlobalData, highlighting the potential scale of the disruption.
Sonic Automotive, another major auto retailer, echoed the concerns of its peers, stating that the CDK outage would likely negatively impact business operations until full system functionality is restored.
As the automotive industry grapples with this cyberattack, the reliance on manual processes serves as a stark reminder of the vulnerabilities in the digital systems that modern businesses depend on.
