CDK hack ripples through US auto industry as dealers flag hit

FILE PHOTO: A computer keyboard lit by a displayed cyber code is seen in this illustration picture taken on March 1, 2017. REUTERS/Kacper Pempel/Illustration/File Photo

By Kannaki Deka

(Reuters) -More U.S. auto dealers flagged a hit from a cyber attack-led software outage at CDK on Monday as the company worked to restore systems used by more than 15,000 retail locations across North America.

The outage impacting CDK's dealer management system, used to complete deals, track store profitability and monitor employee compensations, has "plunged the auto retail industry into disarray", J.P. Morgan analysts said last week.

AutoNation, a leading auto retailer in the U.S., said the outage was disruptive and had adversely impacted its business, though its outlets remain open, continuing to sell, service, and buy vehicles.

Peer Lithia Motors said on Monday it had experienced disruptions in its CDK-hosted system in North America and the incident was likely to have a negative impact on its business operations till the systems are fully restored.

CDK, which reported the outage last week, said on Monday it had begun the restoration process, reiterating that it will take several days to complete.

Meanwhile, AutoNation and peer Group 1 Automotive said they were using alternative processes such as manual paperwork to conduct their business. Both said they had taken precautionary steps to protect their data.

"The timing of the restoration of other impacted CDK applications remains unclear at this time," Group 1 said in a statement.

Bloomberg News reported on Friday that a group of hackers claiming responsibility for the attack on CDK's software systems had demanded millions of dollars in ransom to put an end to the hack.

Though auto retailers have not outlined any sales hit, analysts have flagged a possible impact. "We note some potential risk to late-June (U.S. auto sales) volume from the reported CDK dealer disruptions," Citi analysts said in a note last week.

Auto retailer Sonic Automotive last week said the CDK outage was likely to have a negative impact on its business operations until the systems were fully restored.

(Reporting by Kannaki Deka and Shivansh Tiwary in Bengaluru; Editing by Mohammed Safi Shamsi)