Volkswagen plans to turn German car factory into defence production hub for Israel

Volkswagen has agreed on key terms to sell its Osnabrück factory and convert the German car plant into a defence production hub. Investment company Aurelius would become the majority owner, while Lower Saxony would acquire a stake. Israeli defence company Rafael Advanced Defense Systems is expected to become the facility’s first major industrial partner.Foto: Nigel Treblin/dapd

Image: Nigel Treblin

German auto giant Volkswagen has agreed on plans to sell one of its factories and transform the site into a military production hub, with Israeli arms manufacturer Rafael Advanced Defense Systems set to become its first major industrial partner.

Volkswagen announced Monday that it had reached an agreement with the German state of Lower Saxony and investment company Aurelius on key terms for the sale of its Osnabrück plant. Under the proposed arrangement, Aurelius would become the majority owner, while Lower Saxony would acquire a stake in the facility.

The factory would then be gradually converted from vehicle manufacturing into what Volkswagen described as a “competence centre for security and defence solutions”. Its first anchor project would involve cooperation with Rafael on the manufacture of air-defence systems and components for Germany and other European customers.

Rafael, an Israeli state-owned defence company, is one of the developers of the Iron Dome missile defence system. The Osnabrück factory is expected to manufacture equipment including military vehicles, launchers and generators used by the system, according to Israeli media. Tamir interceptor missiles, however, are not expected to be produced at the site.

The Osnabrück facility has a history of military-related production dating to Nazi Germany. The factory originally belonged to German coachbuilder Karmann, which manufactured aircraft components for the German war effort and used forced labour during World War II.

Volkswagen took over Karmann’s Osnabrück operations following the company’s insolvency in 2009. The automaker decided in 2024 to end vehicle production at the site by summer 2027.

The proposed arrangement is expected to secure employment for more than 1,200 workers. Volkswagen Group CEO Oliver Blume said the agreement would provide a “new industrial future” for the facility.

Lower Saxony Minister-President Olaf Lies linked the shift to Germany’s broader military build-up, saying there had been a “fundamental change in our security situation and our need for protection”.

The deal had reportedly faced resistance from Qatar’s sovereign wealth fund, one of Volkswagen’s largest shareholders. Under the eventual structure, Rafael would not acquire an ownership stake in the plant, which would instead be taken over by Aurelius and Lower Saxony.

The planned conversion comes as Volkswagen undertakes one of the largest restructurings in its history. The company recently confirmed plans to eliminate as many as 100,000 jobs worldwide by 2030 as it contends with weak European demand, high energy costs, US tariffs and growing competition from Chinese manufacturers.

Other European automakers, including Mercedes-Benz, have also explored opportunities in defence production as European governments increase military spending and expand defence-industrial capacity.

Moscow has portrayed the European military build-up as evidence that Western countries are preparing for a potential conflict with Russia.

Russian Foreign Minister Sergey Lavrov has accused Germany and the rest of the EU of “transforming into a Fourth Reich”, citing Berlin’s ambition to build Europe’s strongest conventional military.

Russian President Vladimir Putin made a similar accusation in June, saying NATO countries had moved beyond supporting Ukraine and were now “openly saying that they are preparing for war with us”.

RT News

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