Volkswagen To Turn German Car Plant Into Defence Production Site.
✧ GENERATE BRIEFING +
Volkswagen has entered into a landmark agreement to transfer ownership of its Osnabrueck plant to Israel’s Aurelius Capital and the German state of Lower Saxony, setting the stage to convert the facility from automobile manufacturing into a high-tech defense production center. With vehicle production scheduled to phase out in 2027, the restructuring plan aims to safeguard a substantial portion of the workforce—preserving around 1,200 to 1,400 jobs. The initial anchor project centers on a strategic partnership with Rafael Advanced Defense Systems, focusing on the manufacturing of components and hardware for advanced air-defense programs, including elements of the Iron Dome system, to supply Germany and broader European markets. The agreement marks a strategic milestone for Volkswagen as it navigates its deepest restructuring program to date, which includes sweeping workforce reductions and overhauling excess capacity across German operations to counter high domestic costs and fierce Asian EV competition. Under the proposed ownership structure.
Volkswagen has reached a preliminary agreement to transfer ownership of its Osnabrueck plant to Israel’s Aurelius Capital and the German state of Lower Saxony, with the facility expected to shift from vehicle manufacturing to defence production.
Vehicle production at the plant is scheduled to end in 2027, but the proposed conversion could preserve around 1,400 of its 1,800 jobs, according to labour officials. The deal is part of Volkswagen’s wider effort to find new uses for underutilised German facilities.
The planned new activity will initially centre on cooperation with Rafael Advanced Defense Systems, with potential production of components and systems for air-defence programmes serving Germany and other European markets.
The companies are also considering military applications for Volkswagen’s Amarok pickup trucks. A person familiar with the plans said Polish defence company WB Group could potentially convert vehicles from Volkswagen’s MAN business for military use as well.
Aurelius is expected to hold the majority stake in the site, while Lower Saxony, Volkswagen’s second-largest shareholder, would retain a stake. The state’s involvement follows its earlier investment in the Meyer Werft shipyard, where it acquired a 40% stake for €200 million in 2024.
The Osnabrueck agreement comes shortly after Volkswagen approved its largest restructuring programme, which includes another 50,000 job cuts and plans to address excess capacity at several German plants. The automaker is facing weak European demand, high production costs and increasing competition from Chinese manufacturers.
The planned conversion also reflects a broader push by European manufacturers to use automotive industrial capacity for defence production as governments increase military spending. Companies including Rheinmetall and Continental are pursuing similar opportunities.
