CDK Global overhaul is ahead of schedule, CEO says

Nearly 16 months into his second stint as CDK Global's CEO, Brian MacDonald is touting what he said is progress on streamlining and innovation under the company's private equity ownership that coincided with his return.

"We're further along in our plan than we had hoped," MacDonald told Automotive News in an extensive interview held a few days after the company's CDK Connect 2023 virtual event Oct. 17.

Brookfield Business Partners took CDK private last July in a roughly $8.7 billion deal after which MacDonald launched his "fit and focus" strategy to fine-tune product offerings for dealers.

Changes since then include the launch in August of the CDK Dealership Xperience, a megaplatform that incorporates the CDK Drive dealership management system along with other systems and platforms — such as digital retailing and customer relationship management systems. CDK said the system will eliminate the need for extra software systems, something that dealerships using DMS platforms from CDK and Reynolds have long complained about.

CDK also has reduced its payroll, most dramatically in March when it announced plans to shift an undisclosed number of employees to global business process outsourcer Genpact. The move, part of CDK's ongoing "fit and focus" strategy to reorganize and boost efficiency, eliminated some jobs, but most employees were expected to continue working for CDK through Genpact. CDK does not disclose current staff numbers but employed roughly 6,000 people as of late January.

CDK's revamp and ongoing reinvention is the product, in part, of an executive listening tour visiting with CDK and non-CDK dealers across the country, MacDonald said — a task that required substantial travel.

"I've personally been in 16 states and two [Canadian] provinces since July 4 meeting customers," MacDonald said. "I personally love being out on the road and talking to dealers, and a lot of my senior teams are doing the same."

He spoke with Automotive News on its outsourcing deal, acquisitions, competition and more. Here are edited excerpts.

Outsourcing jobs to Genpact has led to "double-digit" improvements in multiple areas, MacDonald said, though he declined to give specific details.

"Like any transition, there is always a bump in the road here or there, but we have a great relationship, " MacDonald said. "We have a process that when something pops up, we … talk to them."

MacDonald said that CDK continues to make investments in the partnership to improve internal operations and customer-facing technology.

CDK made three acquisitions in 2021: Square Root, a data technology company for automakers; Roadster, a digital retailing platform; and Salty Dot, an insurance provider for car buying. MacDonald said the company continues looking for opportunities and considering how they might fit with ongoing plans. Sometimes discussions lead to partnerships. Other times executives see an acquisition as a better option, he said.

"We just try to step back and say, if we bought something, is that going to help our dealers?" MacDonald said.

CDK might pursue an acquisition if a target company has something CDK can excel with, improve or integrate into its DMS workflow to make things easier for dealers, he said.

CDK is trying to be both strategic and judicious with how it approaches AI and where it might work best. To MacDonald, the choices revolve around data.

"To have good AI, the most important part is to have data … we have very rich data," MacDonald said. "And so as we think about AI, we think about places where that can help, including booking service appointments, managing inventory, providing services."

Rich data should be a deciding factor in how AI is used, he said.

One example is the company's fixed-ops appointment scheduler, which CDK developed, MacDonald said.

"We had that tool capability and then we decided to update and improve it," he said. "We see real tangible benefits of those customers in terms of numbers of appointments booked and timeliness of appointments and all of those types of metrics."

MacDonald said CDK is rolling out some new products enhanced by AI but would not disclose details.

"I don't want to get ahead of my marketing people," he said.

Now that Pendragon shareholders have approved Lithia's $484 million acquisition of the U.K. auto retailer, Lithia will gain a stake in Pendragon's Pinewood DMS, which would be spun off into a standalone company. Lithia and Pinewood plan to form a joint venture to bring a DMS to North America. Lithia CEO Bryan DeBoer said Lithia's partnership with CDK "is long and deep." CDK has said, in turn, that it doesn't expect any changes to its relationship with Lithia "any time soon," something MacDonald echoed to Automotive News.

DeBoer's comments "speaks to the mutual respect each of the companies have for each other," MacDonald said. He added that the DMS market in the U.S. is ready for any changes Lithia and Pendragon might bring.

"The market here is pretty competitive," MacDonald said. "There are a lot of players. Competition is good for the dealers, good for the OEMs, and good for us. It forces us to be sharper."

Brookfield is "a very patient investor" and has confidence in CDK's management team and strategy, MacDonald said.

"Brookfield is the shareholder and they'll decide if and when they want to make a change," he said. "But myself and the management team have a fantastic relationship with Brookfield and we're just working together to make a better company."