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CDK hack shakes up U.S. auto industry, prompting dealers to return to paper forms

AutoNation, a prominent U.S. auto retailer, expressed that the outage caused significant disruption and adversely impacted its business. However, its outlets remain operational, continuing to sell, service, and purchase vehicles.

U.S. auto dealers faced challenges on Monday due to an ongoing cyber attack-induced software outage, prompting some to revert to manual paperwork as CDK, a key technology provider for the car industry, worked on restoring systems utilized by over 15,000 retail locations.

The outage, affecting CDK’s dealer management system crucial for completing deals, tracking store profitability, and managing employee compensation, has disrupted the auto retail sector significantly, according to JPMorgan analysts.

AutoNation, a major U.S. auto retailer, acknowledged the disruptive impact of the outage on its operations despite keeping its outlets open for vehicle sales, servicing, and purchases.

Lithia Motors, another dealer, reported disruptions in its CDK-hosted system in North America, foreseeing adverse effects on business operations until full system restoration.

Jim Seavitt, owner of Village Ford dealership in Dearborn, Michigan, noted that while sales remained robust during recent promotions, the outage hindered the formal transfer of nearly 100 sold vehicles to customers, as CDK generates essential paperwork for these transactions.

Seavitt anticipated resolution by mid-week, expressing concern over prolonged disruptions and hoping for a swift resolution.

CDK, confirming the outage last week, began restoration efforts on Monday, cautioning that full recovery would require several days. AutoNation and Group 1 Automotive adapted by using manual procedures to maintain operations, emphasizing data protection measures.

Group 1 stated uncertainties regarding the timing of full CDK application restoration, echoing concerns raised by Bloomberg News about hackers demanding ransom to cease the attack on CDK’s software.

While the exact sales impact remains unclear, analysts warned of potential disruptions to late-June U.S. auto sales due to the CDK-related dealer issues, as flagged by Citi analysts.

Sonic Automotive anticipated a negative operational impact until CDK systems were fully operational again.

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