VW sells Osnabrueck plant to defence contractors as auto crisis deepens
German automotive giant Volkswagen announced Monday the sale of its Osnabrueck plant to Tel Aviv-based Aurelius Capital and the German state of Lower Saxony, with plans to convert the facility for defence manufacturing. The move marks another chapter in the automaker's sweeping restructuring as it confronts the largest job-cutting programme in global automotive history.
The factory, which has automotive roots stretching back 125 years, will initially focus on producing air defence components for Rafael Advanced Defense Systems, a Haifa-based company established in 1948 and fully owned by the Israeli government. The project aims to manufacture systems and components for air defence applications in Germany and across Europe, though specific details remain undisclosed.
The deal will preserve at least 1,200 of the plant's 1,800 positions, according to VW's works council. The sale price was not disclosed.
"With today's agreement, we are taking an important step towards opening up a new industrial future for the site," said Volkswagen CEO Oliver Blume. "Volkswagen stands by its responsibility for Osnabrueck."
The facility currently produces the Volkswagen T-Roc Cabriolet alongside the Cayman and Boxster models for sister brand Porsche. Vehicle production is scheduled to end in 2027, a decision made in 2024 as the company moves to reduce manufacturing capacity.
The Osnabrueck site was previously operated by Karmann, a specialist convertible and contract vehicle manufacturer that went bankrupt during the 2009 economic crisis. Volkswagen acquired the plant that same year, continuing its tradition of small-series and specialised vehicle production.
Defence sector pivot amid automotive turmoil
The conversion represents the latest convergence between Germany's struggling automotive industry and a booming defence sector, as European nations expand military capabilities in response to growing security concerns.
Rafael, which manufactures the Iron Dome air defence system operational since 2011, has experience with international manufacturing partnerships. In 2020, the company formed joint venture R2S with Raytheon to produce Iron Dome interceptors in the United States. The Iron Dome has intercepted more than 1,500 incoming targets with a success rate exceeding 90 percent, according to Raytheon.
"We are building a long-term industrial relationship with our German partners, with the aim that the technology will be fully produced in Germany, in order to protect Germany and Europe," said Yoav Tourgeman, Rafael's president and CEO.
The deal structure appears designed to navigate complex shareholder dynamics at Volkswagen. Qatar's sovereign wealth fund, which holds approximately 10 percent of VW's equity and controls 17 percent of voting rights as the third-largest shareholder, does not recognise Israel. In July, Qatar's Investment Authority reportedly blocked an earlier proposal for Volkswagen to directly create a joint venture with Rafael at the facility.
By selling to Aurelius and Lower Saxony rather than partnering directly with Rafael, Volkswagen avoids potential conflicts with its Qatari stakeholders. Lower Saxony, which holds 11.8 percent of VW's share capital but controls 20 percent of voting rights under the 1960 Volkswagen Act, wields blocking power over major company decisions.
Broader restructuring challenges
The Osnabrueck sale forms part of Volkswagen's response to mounting pressures from Chinese competition, US tariffs and disappointing electric vehicle sales. Management and unions agreed last week to cut an additional 50,000 positions, bringing total job losses to 100,000 across the coming years. This represents approximately 15 percent of the company's global workforce in what has been described as the largest restructuring ever undertaken in the worldwide automotive industry.
Four other German factories face uncertain futures as the company seeks alternative uses for facilities. Plants in Emden, Hanover, Zwickau and Audi-operated Neckarsulm are under review for possible closure or repurposing.
Throughout its 89-year history, the 10-brand automotive group has managed to avoid major factory closures in Germany. However, the current crisis has forced management to reconsider long-standing commitments.
"Today's move opens up opportunities for the site, but does not relieve Volkswagen of its responsibility to create solid prospects for the remaining employees as well," said Christiane Benner, VW supervisory board member and IG Metall union leader, referring to the hundreds of Osnabrueck workers not covered by the defence manufacturing agreement.
Other German automakers are exploring similar pivots. Mercedes-Benz announced in June a partnership with drone manufacturer Tytan Technologies to adapt vans for mobile drone defence, and has reportedly held discussions with French-German tank maker KNDS about producing armoured personnel carriers at Mercedes facilities.
