The toll the CDK Global cyberattacks takes on the retail automotive industry mounts with each day the disruption continues. While CDK has reported some success in recent days restoring service for some dealership groups including one large public retailer, dealerships using CDK generally have had to grapple with devastating outages. And the interruption could last until July 4 when CDK anticipates service will be fully restored. 

The DMS is the lifeblood of a dealership — to be without it is crippling for a store’s operations. Dealerships affected by the interruption have pursued workarounds such as manual processes and paper forms to keep some vehicle sales activity going but parts and service operations generally have been hit harder. 

Predictions vary on the economic consequences. 

Cox Automotive Chief Economist Jonathan Smoke told The Presidio Group that he views the disruption much like a severe weather event. While it’s certainly hurt thousands of stores, it doesn’t change consumers’ fundamental demand for vehicles. So vehicle sales lost during the last couple of weeks of June are likely to be made up for in July and beyond.

Automotive News reported that Anderson Economic Group, a Michigan consulting firm, estimated that dealerships stood to lose $600 million in a disruption going through June 29 — or nearly $1 billion in an interruption lasting through the July 4 holiday weekend. Anderson made those estimates by examining potential losses from various dealership departments, including vehicle sales, and combining that with estimates for higher costs for floorplan interest and information technology services, plus staffing and administrative expenses. Firm CEO Patrick Anderson described the event to Automotive News as a “hammer blow” for the 15,000 dealerships in North America using CDK. 

J.P. Morgan estimated that the publicly traded dealership groups could experience on average a 10 percent drop in second-quarter earnings per share because of the disruption, Automotive News reported. 

Ameriprise Financial Chief Economist Russell Price told CNN that an outage lasting through June 30 could seriously hurt U.S. retail sales and ultimately ding U.S. gross domestic product. A 10-day outage would likely cost dealerships $16 billion in sales revenue and depress June’s total retail sales by 2.3 percent, translating to the loss of nearly one percentage point from the second quarter’s annualized GDP growth rate, Price estimated. Price also anticipated that what’s lost in June should be made up for in July and the rest of the summer provided that dealerships get back to normal operations.

But even if vehicle sales are made up later, the service business that dealerships are losing during the outage is a different matter. Dealerships sell stall capacity in their service departments, and it’s typically fully booked. So when stalls go unfilled, the corresponding service and parts opportunity is lost forever. Service and parts are a key part of dealerships’ profitability, representing 45 percent of total gross profit for the average dealership in 2023, according to the Presidio-NCM Average Dealership Performance Benchmark. 

The average franchised dealership posted service and parts sales of $8.5 million in 2023, according to the National Automobile Dealers Association, with the industry posting a collective $142.6 billion in service and parts sales for the year. The Presidio Group estimates the average franchised store would have conducted approximately $300,000 in parts and service sales over the period of the CDK disruption. So CDK stores could have lost at least a portion of that over the last two weeks of June. 

Whatever the economic toll, it’s clear the damage has piled up as the disruption lengthened. 

In the meantime, dealerships have struggled but also persevered. 

“It has been a challenge for our team,” Rob Cochran, CEO of 32-store group #1 Cochran, told The Presidio Group. “The first day or two, I’d say was more paralysis. And since then, a lot of creativity, a lot of innovation within our team to figure out how to how to move forward and how to how to serve customers.” 

It’s been good to see CDK competitors like Reynolds and Reynolds Co. and Tekion Corp. stepping up to help, offering dealers access to some tools and forms free of charge. 

It all speaks to the resounding resiliency of retail automotive and dealers themselves, something the Presidio team has seen time and time again over our decades in the industry. As Cox’s Smoke put it, “Dealerships are nimble and quick and entrepreneurial.” 

While there’s sure to be more fallout and lessons learned to come from these cyberattacks, one thing is clear: Dealership groups and technology companies must be forever vigilant in monitoring their systems for vulnerability to intrusion — but they also should have backups and contingency plans in place to minimize a disruption’s effect on operations as much as possible.

Much work will be needed by vendors and dealers across the industry in the days and weeks ahead to ensure that.