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It’s been a tough time to sell and service cars.
Since June 20, auto dealerships and service shops across the United States and Canada using CDK Global’s dealer management software (DMS) have been thrown back into the technological Stone Age, as the software company’s core product was shut down following a series of massive cyberattacks.
Although the company and its competitors that serve auto dealerships in the U.S. and Canada have been proactive in helping to calm the storm, analysts expect these bumps in the road to have a significant impact on the bottom line of some of the country’s largest auto retailers.
Related: Massive Cyber Attack Sends Car Dealers Back to the Stone Age
According to a recent note from JPMorgan, analysts expect some of the largest publicly traded auto dealer groups to see a 7% to 10% decline in earnings per share with their second-quarter 2024 earnings results.
The six dealer groups cited by JPMorgan include Asbury Automotive Group. (arterial blood gases) Autonation Company. (that) Group 1 Automotive Co., Ltd. (GBI) Lithia Motors Company. (Lad) Sonic Motor Company. (I forgot) And the Penske Automotive Group. (Bag) Ashbury, AutoNation, Group 1, Lithia and Sonic use CDK as their primary dealership management system provider, while Penske uses CDK for its Premier Truck Group dealerships.
Analysts say the worst damage from the power outage will come not from the showrooms and sales areas where prices for new and used cars are negotiated, but from the busiest and most stressful part of the dealership that car owners dread visiting: the service and parts department. The loss of CDK software has made affected service departments less efficient at filling orders and repairing customers’ vehicles, JPMorgan experts claim.
We believe that the trader [service and parts] “The new and used auto, finance and insurance segments are likely to bear the brunt of the data management outage, given the significant efficiency loss, while new and used auto sales, finance and insurance are likely to see a slightly smaller impact in the near term,” JPMorgan analysts said in a June 28 note.
Light at the end of the tunnel
The attack on CDK Global has been confirmed to be a ransomware attack, which the FBI defines as a type of “malware that locks you out of your computer files, systems, or networks and demands you pay a ransom to return them.”
The shutdown of the company’s digital document management software has caused problems at nearly half of all auto dealerships across North America, prompting dealers to resort to pen and paper and temporary fixes with other software providers.
Although the second-quarter earnings reports for the affected agency groups are expected to be released within the next few weeks, JPMorgan analysts note that a “significant portion” of the losses from the CDK outage are expected to be recouped within a few weeks once the CDK systems are up and running.
More cars:
- Maserati CEO Defends In-Car Feature That Drivers Hate
- Federal government skeptical about safety of popular driver-assistance technology
- Young people who like loud cars are more likely to have a mental disorder, a study suggests.
according to Report by Automotive News on June 28CDK Global relaunched services for Group 1 Automotive and a small additional group of agency customers on June 27 as part of a phased relaunch. The same day, the company said it was working to relaunch other applications in its DMS suite.
However, the impact of the outage is significant when viewed in numbers. According to Estimates The impact could cost dealers a combined $1 billion if the outage lasts through the Fourth of July holiday — a major auto sales holiday for dealers, according to the Michigan-based Anderson Economic Group.
Speaking to AutoNews, Patrick Anderson, CEO of Anderson Economic Group, said CDK Global’s impact should warn companies inside and outside the auto industry about the dangers of lax cybersecurity practices.
“It’s a huge blow to 15,000 merchants, and should serve as a wake-up call to the rest of the economy that they too are vulnerable to these types of state-sponsored organized hacking and malware attacks.”
“These merchants are having to go to extraordinary lengths to keep their operations open, and will forever lose some of the business they expected to do.”
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