Volkswagen wants to sell car plant for defence production. Tel Aviv-based fund and Lower Saxony are to take it over, while Israeli arms manufacturer will only be a partner

On Monday, Volkswagen agreed with the federal state of Lower Saxony and Tel Aviv-based investment company Aurelius Capital on the basic terms for the sale of its plant in Osnabrück. The site, where the T-Roc convertible is still being produced today, is gradually to become a “competence centre for security and defence solutions”, with the first project being the production of air-defence systems and components together with Israeli group Rafael, manufacturer of the Iron Dome. Volkswagen Group ↗

The sale itself has not yet taken place. The parties have signed only a set of basic points, and the group says that completion of the transaction is subject to final agreements, approval by the company’s relevant bodies and regulatory review. Everything being said about the plant today is therefore an intention, not a current state of affairs.

Why the deal looks so complicated

The original idea was simpler. According to agency reports, after deciding to end production Volkswagen examined alternatives including handing the plant directly to Rafael, but that option fell through because of Qatar’s objections. The emirate is the group’s third-largest shareholder after the Porsche and Piëch families and Lower Saxony, and holds seventeen percent of the voting rights. n-tv ↗

Sources describe differently what exactly Qatar objected to, and the difference is not cosmetic. In July, the German Handelsblatt wrote that a joint venture or another form of cooperation with Rafael was unthinkable for the emirate, while a complete takeover of the plant by Rafael would probably have been acceptable. September agency reporting presents the opposite version, namely that a direct sale did not pass. The two versions agree only that Qatar was the obstacle. Handelsblatt ↗

The emirate has a special relationship with Israel. Unlike the United Arab Emirates and Bahrain, which have normalised relations with Israel, Qatar has not done so, while maintaining contacts with Hamas and thereby mediating talks between the two sides for years.

In any event, the resulting arrangement is unusual. Volkswagen is not selling to Rafael but to a new partnership between Aurelius Capital and Lower Saxony, in which the Israeli investor is the majority owner. Rafael is joining as the new owner’s industrial partner, not as Volkswagen’s partner, and is buying nothing itself. Volkswagen Group ↗

Read also: Volkswagen approves extensive cuts, plants remain uncertain

Three employment figures and what they mean

Three different figures circulated in reports and, at first glance, appear contradictory. IG Metall in Osnabrück explained them in the greatest detail on the day of the announcement.

The plant currently has around 1,800 employees. The proposed solution offers continued employment to just under 1,400 of them, roughly three quarters. And approximately 1,200 is “the current target size of the new competence centre”, which is to be reached through further reductions in the near future, for example through retirements and a phased-exit model with reduced working hours. The three figures therefore do not describe three estimates of the same thing, but three different things. IG Metall Osnabrück ↗

Employment protection has also been agreed until the end of 2029, and according to the union it applies precisely to that target figure of 1,200, not to the broader group of 1,400. It is also the first such guarantee at this site since Karmann’s insolvency.

Volkswagen’s official press release gives only one of these figures, voiced by works council chairwoman Daniela Cavallová: “More than 1,200 people now have prospects for the future at their workplace.” In the same statement, she adds that work continues on a solution for all permanent employees. Volkswagen Group ↗

One figure does not fit this pattern. The Italian outlet Open, citing the Financial Times, writes that the plant employed around 2,300 people and will retain 1,200 jobs after the shift to defence, slightly more than half. The higher starting figure does not appear in German sources, and the available material does not explain the discrepancy. Open ↗

Volkswagen itself additionally writes at the end of its statement that details of the planned activities, timetable and employment prospects will be announced only when reliable results are available.

Mixed mood prevails in the hall

On Tuesday morning, a staff meeting was held at the plant. A report by public broadcaster WDR does not portray a rescued factory. Many people refused interviews after the meeting and said off mic that they had come to Volkswagen to build cars, not to work for the arms industry. WDR ↗

Stephan Soldanski of IG Metall in Osnabrück, who also sits on the supervisory board of Volkswagen’s local subsidiary, summed it up for WDR as follows: “The mood today was very mixed. Employees still cannot quite grasp that 125 years of automotive history in Osnabrück are coming to an end. For many, however, it is also important and clear that things are continuing.” WDR ↗

IG Metall chairwoman Christiane Bennerová, who is also deputy chairwoman of Volkswagen’s supervisory board, attributed the result to the perseverance of the employees, the state government, the works council and the trade unions. At the same time, she added a caveat: in her view, today’s step opens up opportunities for the site but does not relieve Volkswagen of the task of creating reliable prospects for the remaining employees as well. Volkswagen Group ↗

The site is far from ordinary. It continues the tradition of coachbuilder Karmann, which built the Beetle convertible from 1949 onwards and later worked for Volkswagen as a contract manufacturer of small series and special models. Today, the T-Roc convertible is produced there, although the group decided to end its production as early as December 2024. Tagesschau ↗

The conversion of the entire plant remains a plan for now

Osnabrück is not an isolated idea. Reuters calls it the first car plant in Germany intended to become an arms-manufacturing site, while the Italian outlet Open describes it as potentially Europe’s first complete transformation of an automotive plant into a defence facility. The conversion of Osnabrück has not yet been completed.

Open also mapped where else the idea is being considered, and its finding is restrained: so far, no factory has fully converted its production. In France, Renault announced drone production at its Le Mans plant together with defence company Turgis Gaillard, saying it could reach capacity of up to 600 units per month in less than a year. Daimler Truck already produces military vehicles and, together with Arquus, won a French contract for 7,000 vehicles on the Zetros platform. Germany’s Rheinmetall is deliberately seeking capacity, technology and people from the automotive world. Open ↗ Renault Group ↗

Italy’s Iveco took a third route by separating its defence division, including the IDV and Astra brands, and selling it to Leonardo. The transaction closed this March for €1.6 billion in cash. That, however, was not a plant conversion but the sale of an established arms business. Leonardo ↗

Austria’s Der Standard adds a framework missing from Slovak headlines: the Osnabrück plant is becoming a symbol of structural change, and other carmakers may follow. Der Standard ↗

The economic logic is straightforward. Germany has more automotive capacity than the market can absorb, while its military manufacturing base is too thin after decades of low investment. The arms industry needs much of what carmakers already have: halls, machinery, engineers, trained workers and supply chains. Converting and certifying such production is nevertheless a separate and costly task that the mere existence of factory halls does not solve.

Experts warn against treating this as a cure for the crisis. Economist Patrick Kaczmarczyk of the University of Mannheim summed it up for Euronews as early as March by saying that the arms boom would not compensate for what is being lost in other sectors. Osnabrück illustrates this even under the most optimistic reading of the figures, since neither version speaks of preserving all jobs. Euronews ↗

Why Germany and why now

Three days before the announcement, the German weekly Die Zeit spoke in Tel Aviv with Gil Pinchas, until January the Israeli army’s financial chief and now a retired brigadier general who, according to the weekly, is behind the deal’s strategy. “Volkswagen and Rafael embody precisely what our defence ministry is striving for: a shift away from purely export-oriented contracts towards agreements with foreign partners for mutual benefit,” Pinchas said. Die Zeit ↗

According to the weekly, the intention is broader than one plant. After the war that began with Hamas’s attack on 7 October 2023, Israel is building production, personnel and sites abroad to secure its supply chains and relieve its own vulnerable factories. Germany is a suitable partner because it is industrially strong, politically close and itself undertaking massive rearmament.

One thing is being lost in the overviews. Rafael is not starting out in Germany. It has operated there for more than twenty years through subsidiaries and joint ventures, including armour manufacturer Dynamit Nobel Defence as well as EuroSpike and EuroTrophy. What is new is not that the Israeli arms company is entering Germany, but that an entire car plant is to be converted to its technology. defence-industry.eu ↗

Rafael chief Yoav Tourgeman said the aim was a long-term industrial partnership so that equipment to protect Germany and Europe would be produced entirely in Germany. Lower Saxony Minister-President Olaf Lies defended it with a security argument: “Germany and Europe must strengthen their capabilities and become more independent. Lower Saxony wants to help ensure that this creates added value and secure employment.” Tagesschau ↗

Slovakia is waiting for now

For Slovak readers, this is not a distant German story. According to the Automotive Industry Association, the automotive industry accounts for more than 52 percent of industrial output and 42.6 percent of exports in Slovakia, directly or indirectly employing more than 256,000 people. Last year, according to preliminary data, 1.07 million vehicles were produced here—almost 196 cars per 1,000 inhabitants and the world’s highest per-capita figure. Association president Alexander Matušek summed it up by saying that Slovakia has the results but is losing the conditions for further development. Zväz automobilového priemyslu SR ↗

The euBrief outlet asked in May whether Slovak carmakers would follow the German path. The answer at the time was that Volkswagen Bratislava, Stellantis, Kia and Jaguar Land Rover had not stated any intention to enter defence production in their official strategic plans and that electromobility remained their priority. euBrief ↗

That does not mean, however, that Slovak industry does not supply the defence sector. In the programme for 152 CV9035 MkIV infantry fighting vehicles for the Slovak army, Slovak companies account for more than 40 percent of the contract’s total value according to manufacturer BAE Systems, and the supply chain includes almost thirty domestic companies, among them Hriňovské strojárne, Konštrukta-Defence, MSM Land Systems, STV Machinery and ThyssenKrupp Rothe Erde Slovakia. The difference from Osnabrück is that these are arms and engineering companies, not converted carmakers. BAE Systems ↗

According to APZD, some subcontractors from the automotive supply chain are involved as well, and they are doing so quietly. “Very often, however, this takes place under a classified regime, so there is not much information about it,” Andrej Lasz, Secretary-General of the Association of Industrial Unions and Transport, told euBrief. Among the publicly documented cases is the E10 battery cell for drones, which InoBat presented in May 2025 and which the company says integrates technology meeting NATO standards. InoBat ↗

Lasz says that without new models, around 20,000 employees could face layoffs, while defence contracts do not address the sector’s main problems: expensive energy and loss of competitiveness. euBrief ↗

Osnabrück therefore also shows what such a path would require in Slovakia. It was not a decision by the carmaker alone. The buyer is a foreign investor, the co-owner is a regional government, and the driving force is the state interest in domestic defence production.

Limits of this view

In addition to the fact that the agreement has not been finalised, it is not even known exactly what will be produced in the halls. The discussion concerns air-defence systems and components, while Die Zeit says these will mainly be non-explosive components for missile defence and guided missiles. More precise details are not yet public. The price is also open. According to ZDF, it is not yet known how much the deal will cost Lower Saxony, although Minister-President Lies offered the rescue of the Meyer Werft shipyard as a rough comparison, with the state contributing €200 million in 2024. Nor is it known whether binding orders are behind the project. ZDF ↗

There is also a political context that cannot be ignored. The day after the agreement was announced, twelve countries issued a joint statement on a two-state solution in which Britain, France and Canada undertook to introduce domestic measures banning trade in goods from Israeli settlements. According to the statement, Ireland, Spain, the Netherlands, Norway and Belgium had already taken such steps, while the other signatories said they were actively considering their own or European restrictions. Foreign, Commonwealth & Development Office ↗ Israel subsequently announced the closure of the British consulate in East Jerusalem. Reuters cez CNA ↗

The announced measures concern trade in goods from settlements, and the cited sources do not say that they would affect the planned transaction in Osnabrück. Die Zeit also writes, however, that opposition to militarisation and cooperation with Israeli companies because of the war in Gaza is growing in Germany—an aspect the plant’s new owner will have to take into account. Die Zeit ↗

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