The White House selected Monroe Capital to develop a first-of-its-kind investment strategy focused on supporting businesses operating in the U.S. automotive supply chain. Along with the advisory support of MEMA, The Vehicle Suppliers Association (“MEMA”) and the Alliance for Automotive Innovation, Monroe intends to launch this new strategy (the “Drive Forward Fund LP” or the “Fund”) to help address this key White House initiative. The Drive Forward Fund LP will seek to raise up to $1 billion and focus on investing in companies that play a pivotal role in fueling growth and innovation within the $1 trillion U.S. automotive industry.
Monroe will develop this White House inspired strategy to support small and medium-sized companies operating within the automotive value chain that are essential to the growth and modernization of the U.S. automotive industry. The Drive Forward Fund LP will target suppliers and manufacturers, as well as other adjacent businesses that provide complementary products and services to the industry. The mission of the Drive Forward Fund LP is to provide financial support to the businesses that supply mission critical parts such as powertrain, body, drivetrain, chassis, interiors, and electrical components, as well as complementary Software-as-a-Service (“SaaS”) and other auto technology and business service providers that cater to the industry. The Fund will also evaluate growth opportunities to invest in innovative companies in battery component and subcomponent manufacturing and materials recycling. This entire ecosystem of businesses is critical to ensuring the U.S. position at the forefront of the global automotive market. In addition, Monroe believes the Drive Forward Fund LP will benefit the American automotive industry, which should have a positive impact on workers as well as state and local economies with jobs in the areas where these target companies are located.
Building on the announcement Vice President Harris issued in Detroit in May supporting growth and jobs in the automotive industry, Monroe will seek to provide capital solutions to help manufacturers, suppliers, and service providers modernize the key automotive supply chains; including the clean vehicle supply chain, as well as support jobs in the automotive industry – more than 9.7 million across the country. As part of its strategy, the Fund also intends to provide companies access to funding for technology investments, including but not limited to investments in the transition from internal combustion production to electric vehicles (“EVs”), as well as the software offerings that will drive the industry’s shift from a purely transaction sales model to a complete vehicle lifecycle. Major technological enhancements transforming the industry include Software-Defined Vehicles (“SDV”), autonomous driving systems, smart factories, and many other connected technologies. The Fund’s investments will intend to not only allow these businesses to capitalize on the industry’s compelling growth tailwinds, but also to navigate supply chain challenges and the rapidly evolving operating landscape.
Monroe intends to pair private investor capital with leverage, including low-cost government-guaranteed leverage that Monroe hopes to obtain through applying for a U.S. Small Business Administration (“SBA”) Small Business Investment Company (“SBIC”) license for the Fund.
“We believe this new Drive Forward Fund will be critical to catalyzing growth and innovation within America’s automotive supply chain,” said Monroe’s Chairman and CEO, Ted Koenig. “The Fund will have an opportunity to provide essential financial support to small and medium-sized businesses and will help provide a consistent and reliable supply chain to the Original Equipment Manufacturers (“OEMs”), Tier 1 auto manufacturers, and other auto industry stakeholders. In addition, the Fund will strive to provide support to auto industry suppliers as they become more competitive and remain local community anchors as they grow their businesses to support key initiatives within the overall automotive industry. Monroe Capital is honored to play a leading role in this new strategy.”
Alex Parmacek, Portfolio Manager for the Fund at Monroe, added “Looking ahead, we believe the automotive industry is poised for transformative changes driven by advancements in electric vehicles (“EVs”), hydrogen fuel cell technology, and autonomous driving systems, among others. We believe a shift towards clean energy and sustainable vehicles can play a role in efforts to reduce carbon emissions and create a more durable supply base for the OEMs and Tier I suppliers. This Drive Forward Fund expects to play a pivotal role in supporting these technological innovations, to help ensure that the U.S. remains at the forefront of automotive technology and manufacturing.”
Bill Long, President and CEO of MEMA, stated, “MEMA is pleased to have a seat at the table in our ongoing collaboration with the White House to address industry challenges associated with the transition to advanced technology vehicles and to enhance manufacturing competitiveness in the US. In this role, MEMA will continue to provide insights to ensure the supplier community is best served going forward.”
John Bozzella, President and CEO, Alliance for Automotive Innovation said, “A successful transformation to automotive electrification in the United States requires a cutting-edge automotive supply chain that keeps the country competitive and underpins our economic and national security. Automakers are investing billions in this transition and building electrified vehicles in all makes and models, but you’ve got to remember the automotive supply chain is made up of hundreds of companies – many small and medium-sized businesses – that have been churning out components and parts for generations, support communities across the country, and keep the wheels turning on the $1 trillion American auto business. Auto suppliers are essential to this transformation, and that’s what is promising about the Drive Forward Fund. It’s an option for smaller auto businesses to access private money to modernize and support the production of the vehicles of today – and tomorrow. We’re glad to be part of the advisory council for this new fund and provide the automaker perspective.”
The Drive Forward Fund plans to be advised by a council of experts from across the automotive industry to help ensure capital is directed to small and medium-sized auto suppliers, manufacturers, and service providers with ties to significant domestic manufacturing content. Monroe anticipates the advisory council will include representatives from MEMA and Alliance for Automotive Innovation, with support from the OEMs, consultants and business organizations who recognize the importance of providing adequate liquidity and stability for the auto supply chain and critical suppliers. With the expected commitment of strategic and financial investors, along with support and counsel from key industry leaders, the Fund intends to invest in businesses that align with White House’s pledge to ensure that the future of the automotive industry is made in America by American manufacturers and American autoworkers in the communities that have historically powered the industry.
For limited partner investors, the Fund will seek to generate attractive returns on investment while targeting exposure to manufacturers and other business service providers, coupled with compelling growth opportunities in the EV and clean energy markets and auto technology. The Fund will be managed by Monroe, an asset management firm that was previously recognized by the SBA as the SBIC Fund of the Year. As of July 1, 2024, Monroe, together with its affiliates, has approximately $20 billion in assets under management in a diversified private credit platform of 35+ investment vehicles, with more than 450 active portfolio investments, comprised of direct lending and alternative credit funds, business software, real estate, venture debt, publicly traded and private BDCs, separately managed accounts, and collateralized loan obligations. The firm has more than 250 employees and is headquartered in Chicago and maintains 10 offices throughout the United States and Asia.
The Fund intends to begin fundraising after progressing through the SBA licensing process. SBIC licensed funds nationwide manage more than $43 billion in SBA-government guaranteed and private capital, providing equity investment and long-term loans to small businesses in a wide range of industries.