CDK hack upends US auto industry, sending dealers back to paper forms

U.S. auto dealerships are currently facing significant challenges due to a widespread software outage caused by a cyber attack on CDK, a major technology provider for the automotive retail industry. The outage has affected CDK's dealer management system, which is crucial for various aspects of dealership operations, including completing sales, tracking profitability, and managing employee compensation.

The impact of this outage has been substantial, with over 15,000 retail locations affected. Many dealerships have had to revert to manual paperwork processes to continue their operations. Cliff Steinhauer from The National Cybersecurity Alliance noted that this situation has considerably slowed down the auto retail industry.

According to an intelligence analyst at Recorded Future, a security firm, a hacking group known as BlackSuit is responsible for the cyberattack on CDK. However, CDK has not yet confirmed this information. The company has reported that they have begun the restoration process, but it is expected to take several days to complete.

While Cox Automotive, a market research firm, suggests that the impact may be less severe than initially feared, with most sales likely to recover in July, several large auto dealers have reported disruptions to their operations.

AutoNation, a leading U.S. auto retailer, described the outage as disruptive and detrimental to its business, although its outlets remain open and continue to sell, service, and purchase vehicles. Similarly, Lithia Motors has experienced disruptions in its CDK-hosted system in North America and anticipates negative impacts on its business operations until the systems are fully restored.

The outage has created various challenges for dealerships. For instance, Jim Seavitt, owner of Village Ford in Dearborn, Michigan, reported that while sales have not been significantly affected, the delivery process has become more labor-intensive. His dealership sold nearly 100 cars during a recent sale, but the vehicles are in limbo due to the inability to generate the necessary paperwork through CDK's system.

To mitigate the impact, many dealerships, including AutoNation and Group 1 Automotive, have implemented alternative processes such as manual paperwork to conduct their business. They have also taken precautionary measures to protect their data.

The full scope and duration of the outage remain unclear, with some dealerships, like Group 1, uncertain about when CDK applications will be fully restored. Other auto retailers, such as Asbury Automotive and Sonic Automotive, have also reported negative impacts on their operations.

Reports suggest that the hackers responsible for the attack have demanded millions of dollars in ransom to end the hack. Some dealership owners, like Village Ford's Seavitt, hope that CDK will pay the ransom to allow businesses to resume normal operations quickly.

Financial analysts, including those at Citi, have noted potential risks to late-June U.S. auto sales volumes due to these disruptions. For context, total new vehicle retail sales in the United States reached 1.1 million units in June of the previous year, according to data from J.D. Power and GlobalData.

This ongoing situation highlights the vulnerability of the automotive retail industry to cyber threats and the critical role that technology plays in modern dealership operations.