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CDK Update! Dealers Set to Lose Nearly $1 Billion Over Massive Cyberattack.

The automotive industry faces a significant financial crisis following a cyberattack on CDK Global, which has impacted nearly 15,000 dealerships in North America. As of early July, the system still isn’t fully operational, and the losses continue to mount.

Update on Restoration Efforts

CDK Global aims to have all dealer connections live by the morning of July 4. A company representative provided an update:

“We are continuing our phased approach to the restoration process and are rapidly bringing dealers live on the Dealer Management System (DMS). We anticipate all dealers connections will be live by late Wednesday, July 3 or early morning Thursday, July 4. Our Customer Care channels have also been restored and customers can call, chat or submit eCases if they need assistance. We are also actively working on bringing other applications live, including our Customer Relationship Management (CRM), ONE-EIGHTY and Service solutions.”

The Immediate Impact of the Outage

The outage began on June 19 and has caused widespread disruption. Anderson Economic Group estimates that if the outage persists for three weeks, total dealership losses could exceed $940 million. This figure does not include “many other categories” of losses or legal costs related to the shutdown. Patrick Anderson, the company’s founder, mentioned that this estimate assumes new-car buyers affected by the cyberattack will eventually complete their purchases.

Ransom Demands and Cyberattack Origins

The cyberattack, confirmed by Bloomberg to be launched by an Eastern European group, allegedly demanded $10 million to restore the network. While the exact figure paid remains unknown, CDK has been gradually restoring its cloud-based systems since June 27. The initial reactivation included only portions of CDK’s dealer management system, and it remains uncertain when the entire system will be fully operational for all locations.

Long-Term Recovery for Dealerships

Dealerships face a prolonged recovery period even after CDK’s software is back online. CDK’s software is essential for various dealership operations, including parts and service work, sales, financing, and payroll. A parts and service manager at a Kia dealership shared his challenges with Motor1, stating that the software covers “every aspect” of the business. He had to fill out work orders by hand for some repair jobs while turning away many others. Once the software is operational, all pending jobs will need to be entered into the system to process payments.

“My paperwork is piling up really bad,” he explained. “It’s going to be hell generating legitimate paperwork once everything is back up.”

Financial and Operational Strain

The financial impact of the cyberattack on dealerships is significant. Dealers have lost sales, faced delays in service and repair orders, and endured increased operational costs. The disruption has forced dealerships to rely on manual processes, which are time-consuming and error-prone. This has led to inefficiencies and customer dissatisfaction.

The Role of CDK’s Software

CDK’s software plays a crucial role in dealership operations. It manages inventory, processes sales transactions, handles customer relationships, and coordinates parts and service activities. The outage has highlighted the dependence of dealerships on this software and the vulnerabilities in their operational processes.

Response from Dealerships

Dealerships have been working tirelessly to mitigate the impact of the outage. Many have implemented temporary solutions to continue operations, such as manual record-keeping and alternative communication methods with customers. However, these stopgap measures have not fully compensated for the functionality provided by CDK’s software.

Industry-Wide Implications

The cyberattack on CDK Global has broader implications for the automotive industry. It underscores the importance of cybersecurity and the potential risks associated with digital operations. The incident has prompted other companies in the industry to reassess their cybersecurity measures and contingency plans.

Moving Forward

As CDK Global works to restore full functionality, dealerships are focusing on recovery and continuity. The process will involve addressing the backlog of transactions, reestablishing customer relationships, and ensuring that all systems are fully integrated and operational. This recovery period is critical for dealerships to regain their footing and minimize further financial losses.

Lessons Learned

The cyberattack has provided valuable lessons for the automotive industry. It has highlighted the need for robust cybersecurity measures, regular system audits, and comprehensive disaster recovery plans. Dealerships and software providers must collaborate to enhance security protocols and ensure the resilience of their systems against future threats.

The cyberattack on CDK Global has caused significant disruption and financial losses for dealerships in North America. The ongoing restoration efforts are crucial for minimizing further impact and enabling dealerships to resume normal operations. The incident serves as a stark reminder of the importance of cybersecurity in the digital age and the need for proactive measures to protect critical systems and data. As the industry recovers, it will be essential to implement the lessons learned and strengthen defenses against future cyber threats.