Cyberattack on CDK impacts AutoNation's projected earnings for the quarter
The recent ransomware cyberattack on CDK Global, a leading provider of dealer management software for over 15,000 North American auto dealerships, has caused significant disruptions to the operations and earnings of numerous dealerships, including AutoNation. The attack occurred on June 19, 2024, and affected systems such as sales, service, inventory, customer relationship management, and accounting[1][2].
The outage had immediate and far-reaching consequences. AutoNation, one of the largest dealers affected, expects a $1.50 per-share hit on its second-quarter earnings due to the disruption[1]. The company has restored its dealer management systems and core functions, but is experiencing lingering impacts to scheduling, ordering, payment, and reporting functions[1]. As a result, AutoNation now expects GAAP earnings to range between $3.15 and $3.30 per share for the quarter ended June 30[1].
The financial impact of the cyberattack on AutoNation is still being assessed and may need to be updated. The financial loss was primarily due to lost productivity between June 19 and June 30, and certain one-time costs related to guaranteed compensation for commission-based workers[1].
The incident has also had ripple effects across the automotive industry. Numerous car dealers warned of immediate disruptions due to the cyberattack on CDK Global[1]. Dealerships affected include Sonic Automotive, Penske Automotive Group, Group 1 Automotive, and Lithia Motors, in addition to AutoNation[1].
The cyberattack led to a major drop in new vehicle sales in June 2024, with JD Power estimating U.S. retail unit sales down as much as 7.2% compared to June 2023[1]. The dealership sector collectively suffered financial losses of approximately $605 million within the first two weeks after the attack[1].
CDK Global paid a $25 million ransom to the BlackSuit ransomware group to restore services, which were mostly back by early July but with ongoing operational instability[1][2]. This disruption not only affected immediate sales and revenue but also eroded dealer confidence in CDK Global's preparedness and communication during crisis management[2]. The incident triggered multiple lawsuits alleging negligence against CDK by affected dealerships[2].
The cyberattack serves as a stark reminder of the critical role IT infrastructure plays in auto dealerships' earnings and operational continuity[1][2]. Corporate stakeholders are seeking to better understand the risk calculus of their technology stacks, and the question on the minds of many is: Are we a target?[1].
AutoNation's second-quarter earnings are scheduled for release on July 31[1]. The company plans to factor in one-time costs for calculating non-GAAP earnings[1]. Despite the current challenges, the financial impact on AutoNation is not expected to have a material impact on its long-term financial status or ongoing operations[1].
References: [1] CNN Business [2] The Wall Street Journal
- In light of the financial losses and operational disruptions caused by the cyberattack on CDK Global, auto dealerships are paying closer attention to their cybersecurity measures in finance and business, recognizing the critical role IT infrastructure plays in maintaining operational continuity and earning revenue.
- As the financial impact of the cyberattack on AutoNation and other dealerships becomes clearer, corporate stakeholders are re-evaluating their technology risk calculus, questioning whether they are potential targets for similar cyberattacks in the future.
