Volkswagen Plant to Be Converted for Air Defense System Production

Volkswagen has agreed to a potential sale of its Osnabrück plant, which is planned to be converted into a production center for air defense systems in cooperation with Israeli company Rafael.

According to Volkswagen Group, it has agreed on the key deal terms with the state of Lower Saxony and Israeli investment company Aurelius Capital.

Under the preliminary plan, Aurelius will become the majority owner of Volkswagen Osnabrück GmbH, while Lower Saxony will also acquire a stake in the company.

The new owners intend to gradually transform the automotive plant into a center of expertise in security and defense. The first major project will be a partnership with Rafael Advanced Defense Systems.

The facility could produce air defense systems and components for Germany and other European countries. Rafael would provide its technology and expertise, while the plant’s workforce would establish production processes and manufacture the systems at scale.

Volkswagen has not officially specified which systems it plans to produce. At the same time, the Financial Times reports that the project involves components for Israel’s Iron Dome defense system.

The agreement came just days after Volkswagen announced a major restructuring. Amid weak demand, high costs, and competition from China, the automaker is considering closing or repurposing up to four plants in Germany.

In March 2026, it was reported that Volkswagen and Rafael were in talks about potentially producing transport platforms, launchers, and generators for Iron Dome in Osnabrück. The plant was not expected to produce missiles.

The facility has the infrastructure, skilled workforce, and experience needed for small-batch production of complex equipment. In the future, it is also expected to serve as a base for bringing in other defense companies and launching new projects.

Volkswagen plans to stop producing vehicles in Osnabrück in summer 2027 as part of its cost-cutting measures. The automaker has pledged to transfer its production infrastructure and expertise in product development and industrialization to the new entity.

According to Daniela Cavallo, chairwoman of the General and Group Works Councils of Volkswagen AG, the agreement creates the prospect of preserving jobs for more than 1,200 employees. The transition to defense production at the facility is currently planned to take place in stages.

The deal has not yet been finalized: the parties still need to determine the ownership structure, allocate responsibilities, and obtain corporate and regulatory approvals. The parties have not disclosed the financial terms of the potential sale.