Study CDK cyberattack to cost dealerships over 1 billion in losses

pThe nations car dealerships experienced total losses of more than 1 billion as the result of a nationwide hacking and ransomware attack on their software and systems last month according to a new estimate from East Lansingbased consulting firm Anderson Economic GroupppA cyberattack on Chicagobased dealership software provider CDK Global that began June 19 forced CDK to shut down most of its systems across the country for its dealership customers until July 5 It left about half of the nations car dealerships struggling to operate forcing some to return to the days of penandpaper According to Bloomberg the group that orchestrated the attack demanded tens of millions of dollars in ransom to end itppThe result of the attack led JD Power and GlobalData to forecast late last month that US retail sales in June across all automakers will be about 54 lower than they were in June 2023ppBased on June sales results Anderson Economic Group on Monday issued a revised estimate to its June 28 estimate which was a prediction that dealers would experience 944 million in losses The group now estimates that total direct losses to car dealers in the three calendar weeks of the cyberattack actually reached 102 billionppAnderson Economic Group has previously estimated losses from major events such as the 2023 UAW targeted strike against the Detroit ThreeppThe 102 billion in losses includes revenue from the nearly 56200 new car sales that Anderson Economic Group estimated were lost during the threeweek period It also factors in lost earnings on parts and service additional staffing and IT service costs and additional floor plan interest costs on inventory that could not be sold The estimate does not include damages to consumers reputational damages to dealers litigation costs and multiple other categories of damages said Patrick Anderson CEO of the groupppThe revision is based on actual June auto sales and the actual duration of the outage as well as corroborating information from investor disclosures from publicly traded auto dealer groups Anderson wrote in an email to the Free PressppAnderson said the 56200 new auto sales losses it estimated are much less than the actual sales drop that occurred in June and those anticipated for the first week in July Thats because the group presumes that the large majority of people that signed a contract or made a commitment to buy a new car will in fact buy that car or a similar one from the same dealer Anderson saidppBut some customers who will go to another dealer or postpone indefinitely he said and that is where the new sales losses ariseppThis episode is a wakeup call for the auto industry and a warning to all others Anderson said Businesses that rely upon automated systems and centralized software which means nearly all businesses are vulnerable tohacking of systems managed by outside providers and the losses caused by an outage can escalate quicklyppAnderson said the group did not break out the impact specifically for car dealers in Michigan or other states because the effects of the hacking vary Though half of the nations dealers rely on CDK systems the geography of users was not sorted out But he said the publicly traded auto dealership groups that have acknowledged they have been affected include Group 1 Automotive Lithia Motors AutoNation Sonic Automotive and Asbury Automotive GroupppAll of these have disclosures to investors acknowledging the losses Anderson said Penske a Michigan company although I cant confirm the corporate domicile stated their passenger vehicle dealers were not affected but their truck operations were We did not include truck dealerships in our estimateppAnderson said the estimate included usedvehicle sales and new and used car leases It also included in its estimate all parts and services work including both warranty and nonwarranty But it did not include any body shop work or collisiondamage repair covered by auto insurance because sometimes that work is run by an auto dealership and other times it is outsourced he saidppEarlier this month for the second quarter General Motors reported a gain of 06 to 696086 vehicles sold For the first half of 2024 GM reported its US new vehicle sales declined 04 to 1290319 million new vehicles sold GM spokesman David Caldwell said last month that GM could not yet quantify the impact of CDK attack on its salesppOur dealers who use the CDK platform are working to meet strong customer demand under difficult circumstances Caldwell said Some deliveries may be delayed until Q3ppStellantis said it had US sales of 344993 in the second quarter down 21 compared with the same period a year ago The automaker did not reference the cyberattack in its news release but the release did quote Kevin Farrish National Dealer Council chairman for Stellantis related to a range of issuesppWeve been working very closely with Stellantis leadership to better serve our customers by providing the mix of products they desire and at competitive pricing Farrish said Its been a very open collaborative effort working together as a team and well continue to tackle these important issues together on behalf of our customersppFord Motor reported an increase of 08 in its second quarter US sales to 536050 compared with the yearago period For the first six months of 2024 Ford reported 36 growth in sales to 104 million new vehicles soldppMore Biden awards 650 million to 2 Michigan auto plants to make more EVsppMore Future of Detroits Renaissance Center increasingly leans toward demolition of most towersppContact Jamie L LaReau jlareaufreepresscom Follow her on Twitter jlareauan Read more on General Motors and sign up for our autos newsletter Become a subscriberp