Volkswagen has found a new use for its plant in Osnabrück, Germany, where car production is set to cease in 2027. The plan is to gradually transform the facility into a centre for the production and development of security and defence solutions, according to Volkswagen and the Financial Times. Volkswagen has agreed the key terms of a potential deal with the investment firm Aurelius Capital and the state of Lower Saxony. Aurelius is set to become the majority shareholder in the company, whilst Lower Saxony will be a co-owner. The finalisation of the deal is still subject to the signing of contracts, corporate approvals and regulatory authorisations.
- Car production in Osnabrück will come to an end in 2027.
- The factory is being repurposed for defence production.
- The first major partner will be the Israeli company Rafael.
- This refers, in particular, to components of air defence systems.
- The plan could save most of the factory’s jobs.
The Volkswagen plant is to be repurposed for defence production
The plant in Osnabrück has become one of Volkswagen’s problem assets amid the group’s large-scale restructuring. The plant employs around 1,800 employees, whilst car production there was due to be halted next year due to cost-cutting measures and excess production capacity.
The new agreement could save around 1,400 jobs. Once it comes under the control of its new owners, the plant will gradually begin to specialise in defence and security technologies.
Sam Volkswagen officially states that the aim of the agreement is to ensure the long-term preservation of the site and the majority of jobs.
Rafael may manufacture air defence components in Osnabrück
The first major defence project is set to be a collaboration with Rafael Advanced Defence Systems. The Israeli company is known as one of the developers of the missile defence system Iron Dome.
Volkswagen has confirmed that Rafael, together with Aurelius and Lower Saxony, is preparing its first strategic project specifically in the field of air defence. Further industrial partnerships are expected to follow.
The Financial Times reports that the company plans to produce components for Rafael air defence systems, and in the long term, the site could become part of the Israeli defence company’s European production network.
Reuters also reports that the factory may produce components for air defence systems to meet the needs of Germany and other European countries.
From cars to the defence industry
Volkswagen’s decision is part of a wider trend in Germany and Europe. The automotive industry is facing weaker demand, high costs and increasingly fierce competition from Chinese manufacturers. At the same time, European countries are sharply increasing their defence budgets and seeking additional industrial capacity.
Volkswagen itself is undergoing the largest restructuring in its history. The company is cutting costs, reducing its workforce and scaling back production capacity in Germany, whilst considering alternative uses for some of its plants.
Osnabrück’s experience could therefore serve as a model for other companies that will cease manufacturing cars but will be given a new lease of life thanks to defence contracts.
Production of the vehicles will be completed next year
For the time being, the plant continues to manufacture cars. Its gradual conversion is due to begin once the current programmes have been completed in 2027.
The parties have not disclosed the financial terms of the sale. Nor has a full list of air defence systems and components to be manufactured in Osnabrück been made public as yet.
Volkswagen emphasises that the agreement currently sets out the key parameters of the future deal. Once it has been finalised, the parties are to present a more detailed timetable for the conversion of the plant and the launch of defence projects.
