The CDK Global (BBU) cyberattack outage, which crippled dealerships across North America, appears to be on track to be resolved. But the damage is done: the loss of sales and service revenue could be substantial.
On Wednesday evening, CDK Global released a statement containing the company’s first positive news since the cyberattack began on June 19.
“We have successfully brought a small initial test group of dealers online to the Dealer Management System (DMS), and once validation is complete, we will begin to gradually onboard additional dealers,” the company said in a statement to Yahoo Finance. “We are also actively working on rolling out additional applications, including our customer relationship management (CRM) and service solutions, as well as our customer service channels.
CDK attempted to restore its services last week, but had to backtrack after suffering a second cyberattack. CDK later admitted that the perpetrators demanded a ransom to restore services; Bloomberg separately reported that the group behind the attack, BlackSuit, is based in Eastern Europe and was demanding tens of millions of dollars. Currently, it is unclear whether CDK Global paid a ransom; When asked by Yahoo Finance about the payment, the company declined to comment.
Nevertheless, the new gradual rollout of its DMS seems to be a step in the right direction. However, public auto dealership groups like AutoNation (AN), Group 1 Automotive (GPI) and Lithia Motors (LAD) warned that their second-quarter financial results would likely be affected by the outage. Businesses have resorted to other ways of documenting their sales and services, with some even using pen and paper to record transactions.
An Illinois service center is suing CDK Global for lost business due to the cyberattack, and other DMS operators like Dominion have said automakers also want to audit their software to test cybersecurity effectiveness.
With systems impacted for more than a week, automotive research firms are predicting lost sales for June and the second quarter.
“Due to the disruption to dealer software systems, June sales will not reflect 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,” Thomas King, president of data and analytics for JD Power, said in a statement.
King and JD Power forecast that overall June sales will fall from an initial projection of 1.41 million units to between 1.27 and 1.33 million units for the month, a decline of 2.6%. at 7.2% of sales compared to last year.
A positive point: these lost sales could reappear in July. But even a lost week, or a slow sales week, in June could also hurt overall second-quarter sales for dealer groups and automakers, due to the historically strong end-of-June period.
“CDK cyberattacks put a damper on sales during the second half of June, impacting what is arguably one of the most lucrative and busiest periods of the month and quarter for dealers,” a said Jessica Caldwell, head of analytics at Edmunds. “While the impact of these attacks will differ from dealership to dealership, this event is another speed bump on the auto industry’s long road to recovery.”
Caldwell stressed that despite high interest rates and other hurdles, new vehicle sales are expected to be strong in the second quarter due to healthier inventory levels and the return of summer incentives. However, like JD Power, Edmunds now expects sales to be delayed into the third quarter, meaning lost sales could be recouped.
With second-quarter earnings season approaching next month, investors will have a clearer idea of the cyberattack’s impact on dealer group-level sales and overall quarterly deliveries for large-volume automakers like Ford, GM and Toyota.
Pras Subramanian is a journalist for Yahoo Finance covering the automotive industry. You can follow it Twitter and on Instagram.
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