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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: Deborah Griffith has been working with car dealerships on and

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Speaker 2: off for over forty years, processing warranty claims. A few

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Speaker 2: weeks ago in mid June, she logged onto her computer

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Speaker 2: at work and noticed that a key bit of software

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Speaker 2: she uses, made by a company called CDK, had stopped working.

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Speaker 3: I've never experienced anything like that. I'm like, what in

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Speaker 3: the world is going on.

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Speaker 2: CDK is used by an overwhelming majority of dealers in

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Speaker 2: the country to track purchases, parts, and warranties. But CDK

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Speaker 2: had been offline for hours. Short outages weren't that unusual.

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Speaker 2: What was strange this time was that Deborah hadn't seen

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Speaker 2: an update from CDK about any upgrades or maintenance.

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Speaker 3: CDK has a service portal, and if something goes wrong nationwide,

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Speaker 3: they'll put a message on there, like like any website

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Speaker 3: you know works experiencing this outage, you know, and we're

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Speaker 3: working on it, you know, something like that, And there

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Speaker 3: was nothing there.

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Speaker 2: Eventually, Deborah got a call from one of her contacts.

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Speaker 3: He called me and he said, I just got a

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Speaker 3: call from CDK corporate. Everyone has to log out right

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Speaker 3: now and he goes, I mean, right now, there's something

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Speaker 3: going on. They've been hacked. You know, tell your bosses,

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Speaker 3: call your company and tell them everyone needs to log

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Speaker 3: out right now.

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Speaker 2: Activity at dealerships across North America ground to a halt

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Speaker 2: as CDK shut down its systems on June nineteenth in

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Speaker 2: response to the hack. Dealers couldn't access their inventory, buyers

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Speaker 2: couldn't get cars off the lot, and Deborah couldn't process

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Speaker 2: any warranty claims. Just how disruptive was this to the

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Speaker 2: work that you try to do?

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Speaker 3: Very absolutely, very very There's nothing, absolutely nothing I can do,

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Speaker 3: absolutely nothing.

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Speaker 2: Summer is a particularly important time for the car industry,

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Speaker 2: and in the middle of a crucial season, buyers, dealers,

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Speaker 2: and owners looking to repair their vehicles were left in

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Speaker 2: the lurch. Data out on Tuesday showed slowing growth for

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Speaker 2: US car sales. Toyota reported a dip of one point

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Speaker 2: two percent in June compared to last year, while Kia

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Speaker 2: saw a six point five percent decrease. Some companies that

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Speaker 2: reported their quarterly earnings saw slight jumps in sales in

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Speaker 2: Q two. For General Motors appoint six percent rise, but

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Speaker 2: that's compared to an increase of nineteen percent last year.

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Speaker 1: It's millions of dollars worth of sales.

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Speaker 2: Bloomberg Senior Technology editor Dana Wallman has been leading a

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Speaker 2: team that's been reporting on the hack.

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Speaker 1: I mean, even single car dealerships are saying that they've

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Speaker 1: lost millions of dollars in transactions. It really is. It's huge.

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Speaker 2: According to independent outlets, the group behind the hack is

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Speaker 2: known as Black Suit, and they reportedly demanded a ransom

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Speaker 2: of tens of millions, of a ransom that Bloomberg is

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Speaker 2: reporting CDK agreed to pay because the consequences of keeping

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Speaker 2: CDK offline for long would be devastating for the car industry.

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Speaker 1: It's last sales during a busy period, and I don't

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Speaker 1: know that all dealerships will be able to make that up.

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Speaker 2: Today on the show, how a sophisticated group of hackers

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Speaker 2: took down the car sales industry for a few crucial weeks,

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Speaker 2: What the road to recovery for dealerships will look like,

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Speaker 2: and where hackers might target next. I'm Sarah Holder, and

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Speaker 2: this is the big take from Bloomberg News. The software

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Speaker 2: company CDK Global is not exactly a household name, says

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Speaker 2: Bloomberg Senior Technology editor Dana Wallman.

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Speaker 1: CDK is not a company I'd heard of, admittedly, before

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Speaker 1: this story broke, I actually don't know how many of

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Speaker 1: my colleagues had heard of this, and I'm guessing a

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Speaker 1: lot of our readers had not heard of this company either.

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Speaker 2: But for car dealership across North America, the custom software

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Speaker 2: CDK provides is mission critical.

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Speaker 1: It's used to manage pretty much every aspect of their

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Speaker 1: day to day business, from scheduling appointments to tracking inventory

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Speaker 1: in addition to completing transactions. So without that software, business

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Speaker 1: would ground to a halt and.

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Speaker 2: Has Chances are if you've bought a car at a

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Speaker 2: dealership in the US, your data has gone through the software.

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Speaker 2: It's used by around fifteen thousand auto dealers in North America.

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Speaker 2: They do have competitors, but they clearly are the dominant

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Speaker 2: player in this very specialized field. According at least to

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Speaker 2: CDK itself, before this attack, the transactions that were being

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Speaker 2: done through the software accounted for something like two percent

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Speaker 2: of GDP for context, that's around five hundred and sixty

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Speaker 2: five billion dollars. This near monopoly makes CDK a healthy profit.

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Speaker 2: The company was acquired by the asset management company Brookfield

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Speaker 2: for eight point three billion dollars a little over two

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Speaker 2: years ago, but its status also makes the company a

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Speaker 2: vulnerable mark for a cyber attack.

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Speaker 1: It began on Juneteenth, a federal holiday in the US,

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Speaker 1: and it was a day that car dealers were expecting

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Speaker 1: to be a busy sales day during what is already seasonally,

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Speaker 1: mind you, a busy season.

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Speaker 2: That day, news broke that an experienced cybercrime operation called

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Speaker 2: black Suit, which we'll get into in a little bit,

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Speaker 2: had breached the CDK system that forced CDK to shut

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Speaker 2: down the system as they dealt with the disruption, CDK

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Speaker 2: has said it anticipates everything will be back online by Thursday,

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Speaker 2: the fourth of July holiday, but in the meantime, for

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Speaker 2: all the dealerships that rely on its service, losing access

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Speaker 2: to CDK has been like trying to work as an

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Speaker 2: Instagram influencer with Instagram down, or trying to make a

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Speaker 2: podcast during a slackoutage. It's extremely disrupt.

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Speaker 1: It either entirely or mostly brought business to a halt

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Speaker 1: at these dealerships. It wasn't just like they couldn't complete

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Speaker 1: sales of cars. We know that, but there are other

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Speaker 1: things that I didn't even think about that a car

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Speaker 1: dealership might be doing, like trying to swap inventory with

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Speaker 1: another dealer, for instance, maybe another dealer has a specific

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Speaker 1: configuration of a car that your customer wants. Another specific

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Speaker 1: example was the finding of replacement parts. There's a database

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Speaker 1: where you could look up parts for customers who need something.

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Speaker 1: Locating those parts is very hard when they're tracked online

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Speaker 1: or indexed online and you can't get to those systems.

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Speaker 1: Many of these dealerships were out of service and they

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Speaker 1: were either not serving customers or they were sort of

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Speaker 1: resorting to this old fashioned way of dealing with people.

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Speaker 2: And data does mean old fashioned. Workers at these dealerships

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Speaker 2: started handwriting contracts and logging oil changes on paper, and

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Speaker 2: a few had to rely on their intuition some pretty

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Speaker 2: critical decisions, like trying to gauge if buyers had good

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Speaker 2: enough credit to drive off with a car.

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Speaker 1: In a sense, just using their gut to make these decisions.

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Speaker 1: It would otherwise be driven by data, really and hard numbers.

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Speaker 2: Obviously, this has all been a huge pain for car

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Speaker 2: sellers and for CDK, which is now facing lawsuits from dealers,

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Speaker 2: repair shops, and customers. Those customers have something else important

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Speaker 2: on the line, all that personal data the hackers also

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Speaker 2: presumably got when they accessed cdk's systems. Should consumers be

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Speaker 2: worried about this hack at all?

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Speaker 1: I would be worried, and certainly in our reporting we've

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Speaker 1: found that customers themselves have express worry. We visited some

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Speaker 1: car dealerships in person and have found that, aside from

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Speaker 1: the fact that the hack brought these systems to a halt,

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Speaker 1: a more hidden impact of this hack is that customers

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Speaker 1: are now wary of buying a car. They have read

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Speaker 1: about this attack is the press and are a little

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Speaker 1: nervous about handing over data to car dealerships. So I

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Speaker 1: think beyond the question of should car shoppers be nervous,

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Speaker 1: they are nervous, and it is having a hard to

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Speaker 1: measure impact on car sales, even on top of the

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Speaker 1: fact that a slowdown in modern systems is making it

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Speaker 1: hard to transact.

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Speaker 2: Coming up after the break, it's not just cars. We

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Speaker 2: break down who is behind the CDK hack and why

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Speaker 2: other companies should be on high alert. So here's where

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Speaker 2: things stand. For nearly two weeks, thousands of car dealerships

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Speaker 2: across the country have been unable to access CDK software,

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Speaker 2: which is crucial for everything from assessing credit worthiness to

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Speaker 2: figuring out what cars are available to be sold. That's

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Speaker 2: resulted in millions of dollars in lost sales, and Bloomberg

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Speaker 2: Senior Technology editor Dana Walman says figuring out who was

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Speaker 2: behind the attack wasn't easy. Who is the hacking group

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Speaker 2: behind the attack?

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Speaker 1: So today at least they're called black Suit, and I

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Speaker 1: say today at least because these groups do intentionally change

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Speaker 1: their names, often to make themselves harder to track and

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Speaker 1: keep tabs on.

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Speaker 2: According to security experts, before Blacksuit was black Suit, they

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Speaker 2: were also known as Royal. That group was responsible for

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Speaker 2: a cyber attack about a year ago that forced the

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Speaker 2: city of Dallas to shut down its computer systems, including

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Speaker 2: one that the local fire department relies on to track emergencies,

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Speaker 2: for four days. Firefighters in Dallas resorted to moving magnets

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Speaker 2: around on a map to keep tabs on incidents and

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Speaker 2: manage their crews. Some of Royal's members came from one

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Speaker 2: of the most notorious hacking groups ever, Kanti, meaning Black Suit,

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Speaker 2: has a pretty distinguished pedigree.

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Speaker 1: They are really experienced group of hackers and extortionists. We

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Speaker 1: describe them as sort of low key and business like,

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Speaker 1: as if to say they're not trying to disrupt anyone.

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Speaker 1: They're just trying to run a business.

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Speaker 2: To run that business, Blacksuit uses a two pronged approach.

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Speaker 1: First of all, they engage in what we've called in

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Speaker 1: our reporting double extortion, that is the shutting down of

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Speaker 1: services and also the threat to publish user data online.

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Speaker 1: And we've also described them in a reporting as offering what's

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Speaker 1: called ransomware as a service.

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Speaker 2: Ransomware as a service, Dana says that means that Blacksuit

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Speaker 2: essentially offers up its skill set hacking vulnerable companies or

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Speaker 2: school districts or libraries to whoever wants to pay for it.

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Speaker 1: In discussing this with my colleagues, I had first likened

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Speaker 1: it to mercenaries, and one of my colleagues said, no, actually,

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Speaker 1: they're more like arms dealers. Even if they're not committing

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Speaker 1: the attack themselves, they are providing the cyber weapon and

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Speaker 1: someone else is using them to commit the attack, and

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Speaker 1: then everyone behind the scenes is profiting off of it.

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Speaker 2: Sources have told Bloomberg that in general, Blacksuit demands a

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Speaker 2: ransom of anywhere between three hundred thousand dollars and five

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Speaker 2: million dollars, and Blacksuit demanded tens of millions of dollars

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Speaker 2: from CDK, which planned to pay the ransom. According to

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Speaker 2: a source who spoke to Bloomberg, they themselves have not

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Speaker 2: listed CDK as a victim on their website, which we've

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Speaker 2: reported is typical practice for them. Actually, they have on

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Speaker 2: their website about close to one hundred victims listed, and

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Speaker 2: those are just the ones who are listed. If if

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Speaker 2: a victim did pay an extortion fee, their names don't

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Speaker 2: even appear. And CDK, we've reported, intended to pay the ransomware.

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Speaker 1: And also it's just in general, it is hard to

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Speaker 1: get hackers to comment for a story on Bloomberg.

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Speaker 2: So far, it's unclear if black Suit was acting on

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Speaker 2: its own behalf or on behalf of someone else. The

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Speaker 2: thing that I found so surprising was how black Suit

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Speaker 2: went about getting access to cdk's systems. Dana says they

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Speaker 2: did it through what's known as social engineering. In practice,

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Speaker 2: that meant posing as employees. That's right, hackers posed as

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Speaker 2: employees to trick customers into helping them access the company's systems.

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Speaker 1: And it is a reminder too that not all hacking

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Speaker 1: is what we imagine from seeing the movies, seeing hackers

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Speaker 1: depicted in the movies. It isn't necessarily an exploitation of

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Speaker 1: a vulnerability and code. There is sometimes this element of

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Speaker 1: really convincing persuasion.

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Speaker 2: Right. They didn't have to pack into the mainframe as

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Speaker 2: we think of it. They literally had to just pretend

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Speaker 2: they were employee and get access that way. In part, yeah,

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Speaker 2: security analysts say CDK isn't the first organization to fall

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Speaker 2: prey to Blacksuit's tactics. Recent victims also include the Kansas

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Speaker 2: City Police Department and a school district in Georgia. But

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Speaker 2: Dana says there's one sector in particular that she's most

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Speaker 2: worried about.

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Speaker 1: The world of healthcare, electronic healthcare providers. It is a

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Speaker 1: huge industry, but I wouldn't say there's a ton of

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Speaker 1: variety in that industry. I don't think it's that uncommon

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Speaker 1: to see a quasi monopoly like the kind that CDK has,

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Speaker 1: and I think a similar dynamic where once these companies

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Speaker 1: are onboarded onto this software, it is difficult for them

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Speaker 1: to get out and transfer to another piece of software,

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Speaker 1: whether it's because they're locked into a five year contract,

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Speaker 1: or it's difficult to migrate their data to something else,

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Speaker 1: or because you've got all these employees who you have

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Speaker 1: to train on new software when they could otherwise be

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Speaker 1: getting work done.

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Speaker 2: Recently, Britain's National Health Service said it was investigating claims

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Speaker 2: that hackers had published confidential data stolen from several London hospitals.

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Speaker 1: The hackers got access to this really sensitive patient data

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Speaker 1: involving people's blood work and pregnant women.

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Speaker 2: With the stakes around data vulnerability getting higher, I asked

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Speaker 2: data if cdk's decision to pay the ransom could set

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Speaker 2: a bad precedent. There's a school of thought that paying

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Speaker 2: ransom will only encourage future hackers.

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Speaker 1: Is that a worry here? I mean, without me editorializing myself,

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Speaker 1: it is an active debate in the cybersecurity community, and

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Speaker 1: I think there are people who do subscribe to the

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Speaker 1: school of thought that as hard as it is to

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Speaker 1: be named publicly and shamed and to accept the impacts

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Speaker 1: that more broadly speaking, pulling the lens back, it is

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Speaker 1: destructive in a longer term way to keep paying these ransoms.

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Speaker 1: I would not say there's a consensus on that necessarily,

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Speaker 1: but it does seem to be an active source of

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Speaker 1: debate in the cyber threat community.

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Speaker 2: Either way, Dana says that the CDK situation isn't likely

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Speaker 2: to be the last one, and that the trend is

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Speaker 2: towards more potentially devastating consequences than not being able to

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Speaker 2: buy a car.

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Speaker 1: These attacks seem relentless, and they have felt especially vicious.

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Speaker 2: The CDK hack serves as a warning for any industries

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Speaker 2: that are overly reliant on one piece of software, Dana says.

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Speaker 2: But for now, Deborah Griffith is still just trying to

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Speaker 2: deal with the mess this hack has created for her.

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Speaker 3: So, I mean, it's yeah, chaos. That word you use

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Speaker 3: is a very good word.

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Speaker 2: You know what might happen if CDK doesn't get everything

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Speaker 2: back online by July fourth? How might that affect the industry?

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Speaker 3: I mean, if you're in a dealership, especially the service department,

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Speaker 3: you know, every time something breaks that you don't want

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Speaker 3: to break, you know, you can't just sit back and

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Speaker 3: wine about it. You know, you just have to roll

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Speaker 3: with it, and you have to, you know, come up

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Speaker 3: with a solution. Don't cry about the reason why. You know.

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Speaker 2: This is the big take from Bloomberg News. I'm Sarah Holder.

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Speaker 2: This episode was produced by Alex Sugiura. It was edited

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Speaker 2: by Aaron Edwards. It was mixed by Rishi Bajakol. It

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Speaker 2: was fact checked by Thomas lu Our senior producers are

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Speaker 2: Naomi Shaven and Kim Gettleson. Our senior editor is Elizabeth Ponso,

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Speaker 2: Nicole bimsterbor is our executive producer. Sage Bauman is Bloomberg's

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Speaker 2: head of podcasts. If you liked this episode, make sure

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Speaker 2: to subscribe and review The Big Take wherever you listen

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Speaker 2: to podcasts. It helps people find the show. Thanks so

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Speaker 2: much for listening. We'll be off tomorrow for the fourth

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Speaker 2: of July, but we'll be back on Friday.