The CDK Global (BBU) cyber-attack disruption that crippled retailers across North America appears to be on the way to a resolution. But the damage is done: the lost revenue from sales and services can be significant.
On Wednesday night, CDK Global released a statement with the first positive news from the company since the cyber attack began on June 19.
“We have successfully brought a small initial test group of direct merchants to the Merchant Management System (DMS) and once validation is complete, we will begin deploying to other merchants,” the company said in a statement to Yahoo! Finance. “We are also actively working to bring additional live applications – including Customer Relationship Management (CRM) and Service solutions – and our Customer Care channels.”
CDK tried to restore services last week, but had to back off after suffering a second cyber attack. CDK subsequently acknowledged that the perpetrators were seeking a reward to restore services; Bloomberg reported separately that the group behind the attack, BlackSuit, is based in Eastern Europe and was demanding tens of millions of dollars. Currently, it is unclear whether CDK Global has paid any compensation; when asked by Yahoo Finance about the payment, the company declined to comment.
Still, the new stage introduction of its DMS appears to be a step in the right direction. However, public auto dealer groups such as AutoNation ( AN ), Group 1 Automotive ( GPI ) and Lithia Motors ( LAD ) warned that their second-quarter financial results would likely be affected by the shutdown. Companies have used alternative means of documenting sales and services, with some even using pen and paper to record transactions.
An Illinois service center is suing CDK Global for lost business due to the cyber attack, and other DMS operators such as Dominion have said the automakers also want to audit their software to test the effectiveness of cyber security.
With systems affected for more than a week, automotive research firms are predicting sales losses for the month of June and the second quarter.
“Due to the outage in dealers’ software systems, June sales will not reflect actual consumer demand for new vehicles. Instead, a significant number of sales that would have occurred in June are now likely to occur in July,” Thomas King, president of data and analytics at JD Power, said in a statement.
King and JD Power project overall June sales will decrease from an initial forecast of 1.41 million units to between 1.27 and 1.33 million units sold for the month, or a 2.6% to 7.2% decline in sales compared to a year ago. .
One positive: Those lost sales may reappear in July. But even a missed week, or a slow sales week, in June could affect overall second-quarter sales for dealer groups and automakers as well, given the historically strong late June period.
“The CDK cyberattacks have thrown a monkey wrench into sales during the second half of June, impacting what is arguably one of the most profitable and busiest times of the month and quarter for retailers,” said Jessica Caldwell, head of Edmunds knowledge. “While the impact of these attacks will vary from dealer to dealer, this event is another speed bump on the auto industry’s long road to recovery.”
Caldwell noted that despite high interest rates and other headwinds, new vehicle sales were poised to be strong in the second quarter due to healthier inventory levels and the return of summer incentives. However, like JD Power, Edmunds now expects sales to be pushed into the third quarter, meaning the sales losses could be recovered.
With second-quarter earnings season coming up next month, investors will get a clearer picture of the cyberattack’s impact on dealer group-level sales and overall quarterly shipments for volume automakers like Ford, GM and Toyota.
Pras Subramanian is a reporter for Yahoo Finance covering the automotive industry. You can follow it I tweet and so on Instagram.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance