With advisory support from MEMA Original Equipment Suppliers and the Alliance for Automotive Innovation (Auto Innovators), Monroe Capital will develop a first-of-its-kind investment strategy focused on supporting small- and medium-sized suppliers and manufacturers operating in the U.S. automotive supply chain.
Monroe was chosen by the Biden Administration to launch the “Drive Forward Fund LP.” The initiative seeks to raise up to $1 billion and invest in companies that are essential to the growth and modernization of the U.S. automotive industry, a release from Monroe states.
Other adjacent businesses that provide complementary products and services to the industry will also be supported through the initiative.
“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 and other auto technology and business service providers that cater to the industry,” the release says.
The fund will also evaluate growth opportunities to invest in innovative companies in battery component and subcomponent manufacturing and materials recycling.
Monroe believes the fund, through its benefits to the automotive industry, should have a positive impact on workers as well as state and local economies with jobs in the areas where target companies are located.
Building on the announcement Vice President Kamala Harris made in Detroit in May about supporting growth and jobs in the automotive industry, Monroe will seek to provide capital solutions to help manufacturers, suppliers, and service providers modernize key automotive supply chains, Monroe said. That includes the clean vehicle supply chain and to support jobs in the industry.
The fund will also provide companies access to funding for technology investments, including but not limited to, investments in the transition from internal combustion production to electric and software offerings that will “drive the industry’s shift from a purely transaction sales model to a complete vehicle lifecycle,” the release says.
The intention of investments will be to capitalize on growth in major technological enhancements such as software-defined vehicles, autonomous driving systems, smart factories, and many other connected technologies. Monroe also hopes to navigate supply chain challenges and the rapidly evolving operating landscape with the fund.
Monroe intends to pair private investor capital with leverage, including low-cost government-guaranteed leverage which it hopes to obtain through applying for a U.S. Small Business Administration Small Business Investment Company 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 Ted Koenig, Monroe’s chairman and CEO, in the release.
“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 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, 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.”
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, the release says.
Monroe anticipates the advisory council will include representatives from MEMA and the Auto Innovators with support from OEMs, consultants, and business organizations who recognize the importance of providing adequate liquidity and stability for the auto supply chain and critical suppliers.
“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,” said Bill Long, MEMA president and CEO, in the release.
John Bozzella, Auto Innovators president and CEO, said for the transition to automotive electrification to be successful in the U.S, there needs to be 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,” Bozzella said.
“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.”
For limited partner investors, the fund seeks 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 release says.
Fundraising for the Drive Forward Fund will begin after the SBA licensing process.
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