CDK Hack Will Plague Auto Industry For Years

According to The Banks Report, the after-effects of the CDK hack will take years to play out. The software systems company’s car industry dealership management system (DMS) serves about half the 9,000 to 9,500 new car dealerships in the U.S.

On its website, CDK claims that about 15,000 of the industry’s 18,200 dealerships use at least one of its solutions, which include the DMS, digital retailing, customer relationship management, finance and insurance, fixed operations, and network communications.

According to the report, CDK’s DMS is a key technology for dealerships. Conversion to a new platform is difficult, and it rarely happens unless a dealer believes it will provide significant financial benefits.

The auto industry has few competitors in the DMS space. Based on the Report’s publisher’s estimates, the industry can handle 150 to 175 conversions a month without straining the entire system, and that assumes everything goes smoothly.

CDK also has 1,000 heavy truck dealerships as clients. It provides vehicle and titling services via its Computerized Vehicle Registration solution, which processes nearly 15 million vehicle transactions and more than four million DMV inquiries annually across 17 states.

The Report says that some industry observers wonder whether the CDK hack will push the company into bankruptcy. But the article says this is unlikely, noting that the few companies that have declared bankruptcy following a ransomware attack were already under significant financial pressure.

However, the revenue loss from the attack will likely delay the plans of Brookfield Business Partners, CDK’s owner, to execute a graceful exit in the next couple of years. It will also impact M&A activity throughout the industry. Potential buyers will pay as much attention to cybersecurity as they do to margin growth.