Indexbit Exchange:CDK Global cyberattack leaves thousands of car dealers spinning their wheels

Bel Air dealership among nationwide businesses impacted by cyberattack

Car dealers across the U.S. are floundering after cyberattacks this week on CDK Global, a maker of software used to operate their businesses, made it all but impossible to sell vehicles. 

Tom Maioli, who owns Celebrity Motor Car Company, which operates five luxury car dealerships across New York and New Jersey, told CBS MoneyWatch his business is "completely shut down."

"We cannot process paperwork. Everything is frozen, everything is tied up — we cannot move money back and forth to pay off cars, to finance our customers' transactions," he said. 

Such disruptions are particularly damaging to sales-driven businesses like auto dealerships, where car shoppers who are primed to lay down their cash on a vehicle may walk away when faced with frustrating delays. Maioli said that while he's trying to keep customers engaged, he has no sense of when his sales systems will be fully functional again, leaving the business in limbo.

The company's dealer management system, which is used by some 15,000 dealerships, remained unavailable Thursday and Friday, causing headaches for dealers and would-be car buyers.

For one family in New Jersey, the outage meant they couldn't drive away with their new Audi Q5. Daniel Lanni told Bloomberg his family was expecting the vehicle to be delivered on June 19, but that it now remains unclear when they'll take possession.

"The kids were really excited," Lanni, a 41-year-old commercial real estate broker, told Bloomberg. "They're upset and now they're just regularly asking about it."

On Wednesday, CDK Global took down its services as a precaution, effectively bringing sales to a halt for its customers. A second cyberattack this week has compounded the problem. 

CDK has indicated that the outage could last several days and has not publicly announced when it expects its services to be fully restored. The financial repercussions of the tech failure are expected to be substantial given that CDK powers sales for roughly half of the car dealerships in the U.S.

"Royal pain in the rear"

Geoff Pohanka, chairman of Pohanka Automotive Group, told CBS MoneyWatch that 20 of the company's dealerships rely on CDK's dealer management system, or DMS, to operate.

"We are very dependent upon the DMS, and it affects all parts of our business," he said. "It generates all of our forms. If you come in, we enter you in the system, it builds a file in terms of paperwork and finance papers, and right now none of that is functioning."

Pohanka, who said the dealership still has phone and internet service, said the business is doing its best to keep sales rolling. "We may not be able to have all the documents signed and will need to bring the customer back in to complete them, but we still can function," he said, while conceding that "everything takes longer [and] is more complicated." 

The DMS outage also affects the company's service and parts department. Typically, the dealership uses CDK software to generate electronic contracts and print out work orders. Now, they're operating manually, which is slower.

"We will certainly lose business because it takes longer to complete transactions, and some things will fall through the cracks. There will be losses," Pohanka said. "It's debilitating, and the longer it goes on the harder it will be for dealers. I know we will lose revenue. It really is a royal pain in the rear." 

Sport Honda, a Honda dealer and CDK customer in Silver Spring, Md., is also scrambling to continue serving customers.

"It's a difficult task, but there was paper before there were computers so we have to go about it that way," a dealership manager told CBS MoneyWatch. "You can move around the computer software and go back and do things like you did back in the day." 

Employees at other dealerships took to social media forums to say they were tracking orders on "sticky notes" or using Excel spreadsheets to log transactions. 

For CDK, the fallout may not only be technological. Maioli, the car dealership owner, said he's retained legal counsel and is mulling a class-action lawsuit against the company. 

In:
• Technology
• Cybercrime
• Cyberattack
• Auto Industry

Megan Cerullo

Megan Cerullo is a New York-based reporter for CBS MoneyWatch covering small business, workplace, health care, consumer spending and personal finance topics. She regularly appears on CBS News 24/7 to discuss her reporting.