Volkswagen is in discussions to repurpose a German factory for military production as it looks to avoid job losses at a site facing closure, reports Financial Times. The plan would shift output away from cars and toward components for Israel’s Iron Dome air defense system.
People familiar with the matter said the automaker is negotiating with Rafael Advanced Defence Systems on a potential agreement involving the Osnabrück plant in Lower Saxony. The facility employs about 2,300 workers and has been under threat as vehicle production is set to end next year.
Under the proposal, the site would manufacture parts for the Iron Dome system, including heavy-duty trucks used to transport missiles, as well as launchers and generators. The plant would not produce the missiles themselves. Rafael is considering a separate German facility for missile production due to specialized handling requirements.
“The aim is to save everybody, maybe even to grow,” said one of the people familiar with the plans. “The potential is so high. But it’s also an individual decision for the workers if they want to be part of the idea.”
The timeline being discussed could see production begin within 12 to 18 months, assuming workforce approval. Another person said the transition would require limited additional investment. “There is some money needed to transition to new production but this is pretty easy.”
The German government is backing the discussions, according to a second person with knowledge of the talks. Officials have encouraged companies to make use of excess industrial capacity as Berlin ramps up defense spending.
Germany plans to invest more than €500 billion in defense by the end of the decade, with air defense systems identified as a priority. The move comes as European countries continue rearmament efforts following Russia’s full-scale invasion of Ukraine.
Rafael is seeking to expand its footprint in Europe and hopes to market Iron Dome systems to multiple governments, including Germany. One person said the company selected Germany in part due to its strong political support for Israel.
Volkswagen has prior involvement in defense manufacturing through a joint venture between its MAN subsidiary and Rheinmetall, which produces military trucks. A deal with Rafael would mark a broader return to defense-related production for the company.
“The idea is that ‘proven [defence] tech comes together with German manufacturing’ to produce the system,” the person added.
The Osnabrück site has been part of Volkswagen’s broader cost-cutting measures agreed in 2024. The company plans for roughly 35,000 workers to leave by 2030 through voluntary programs.
People familiar with the matter said the automaker is negotiating with Rafael Advanced Defence Systems on a potential agreement involving the Osnabrück plant in Lower Saxony. The facility employs about 2,300 workers and has been under threat as vehicle production is set to end next year.
Under the proposal, the site would manufacture parts for the Iron Dome system, including heavy-duty trucks used to transport missiles, as well as launchers and generators. The plant would not produce the missiles themselves. Rafael is considering a separate German facility for missile production due to specialized handling requirements.
“The aim is to save everybody, maybe even to grow,” said one of the people familiar with the plans. “The potential is so high. But it’s also an individual decision for the workers if they want to be part of the idea.”
The timeline being discussed could see production begin within 12 to 18 months, assuming workforce approval. Another person said the transition would require limited additional investment. “There is some money needed to transition to new production but this is pretty easy.”
The German government is backing the discussions, according to a second person with knowledge of the talks. Officials have encouraged companies to make use of excess industrial capacity as Berlin ramps up defense spending.
Germany plans to invest more than €500 billion in defense by the end of the decade, with air defense systems identified as a priority. The move comes as European countries continue rearmament efforts following Russia’s full-scale invasion of Ukraine.
Rafael is seeking to expand its footprint in Europe and hopes to market Iron Dome systems to multiple governments, including Germany. One person said the company selected Germany in part due to its strong political support for Israel.
Volkswagen has prior involvement in defense manufacturing through a joint venture between its MAN subsidiary and Rheinmetall, which produces military trucks. A deal with Rafael would mark a broader return to defense-related production for the company.
“The idea is that ‘proven [defence] tech comes together with German manufacturing’ to produce the system,” the person added.
The Osnabrück site has been part of Volkswagen’s broader cost-cutting measures agreed in 2024. The company plans for roughly 35,000 workers to leave by 2030 through voluntary programs.
