BERLIN, Germany-Volkswagen has reached a preliminary agreement to convert its car factory in Osnabrück, northwestern Germany, into a centre for security and defence production.
The automaker said it had agreed on key terms for the possible sale of the factory to Israeli investment company Aurelius Capital and the state of Lower Saxony.
Under the proposed transaction, Aurelius would become the majority owner of Volkswagen Osnabrück GmbH, with Lower Saxony also holding a stake.
The facility will gradually shift from producing cars and specialised vehicles to manufacturing security and defence equipment.
An initial project under consideration involves working with Israeli defence company Rafael Advanced Defense Systems to manufacture systems and components for air defence systems intended for Germany and other European countries.
Rafael is one of the companies involved in developing Israel’s Iron Dome, Arrow and David’s Sling air and missile defence systems.
“Rafael would contribute its technological expertise and long-standing experience in the field of modern air defence systems, while the workforce in Osnabrück would play a central role in establishing manufacturing operations and industrialising production,” Volkswagen said.
The Osnabrück plant currently employs about 1,800 people. Labour representatives said the planned conversion could secure approximately 1,400 jobs, while Volkswagen said more than 1,200 employees had gained prospects of continued employment.
Volkswagen decided in 2024 to end vehicle production at the plant by mid-2027 as part of its restructuring programme.
The company has been reducing production capacity as it struggles with weak demand in Europe, high manufacturing costs and growing competition from lower-priced Chinese carmakers.
Volkswagen has warned that several German factories could be closed or given new roles if alternative uses are not secured.
The Osnabrück agreement could provide a model for repurposing other underused vehicle plants as Germany and other European countries increase defence spending.
Volkswagen Group Chief Executive Officer Oliver Blume said the agreement was an important step towards finding a sustainable future for the facility.
“Volkswagen stands by its responsibility for Osnabrück. With today’s agreement, we are taking an important step towards opening up a new industrial future for the site,” Blume said.
Lower Saxony Premier Olaf Lies said Germany and Europe needed to strengthen their defence capabilities following changes in the continent’s security situation.
“Germany and Europe must strengthen their capabilities and become more independent,” Lies said.
The parties plan to introduce further industrial partnerships and defence projects at the site. Reports indicate that possible future activities could include converting Volkswagen Amarok pickup trucks into military vehicles, although that proposal has not been formally confirmed.
The sale remains subject to final agreements, corporate approvals and regulatory reviews.
Volkswagen said details on the timetable, planned activities and employment arrangements would be released once negotiations were completed.
The conversion comes as European governments expand military budgets and defence manufacturers seek additional production capacity amid heightened security concerns across the continent.
