Volkswagen Plant Converts to Defense Production with Rafael, Lower Saxony

The German state of Lower Saxony, Israeli company Rafael Advanced Defense Systems, and Israeli investment firm Aurelius Capital signed a letter of intent on Monday to acquire and convert Volkswagen's vehicle plant in Osnabrück.

This deal aims to transform the factory into a center for security-and-defense manufacturing. Volkswagen CEO Oliver Blume stated the agreement is an important step towards opening up a new industrial future for the site. Volkswagen announced in 2024 that it would phase out vehicle production at the Osnabrück plant by the summer of 2027. The initial project with Rafael will focus on the potential manufacture of systems and components for air defense systems for Germany and Europe.

Rafael would provide technology and air-defense expertise, while the Osnabrück workforce would help establish and industrialize the production. Rafael CEO Yoav Turgeman said the technology will be fully manufactured in Germany and will contribute to strengthening the security of Germany and Europe. The deal is expected to preserve at least 1,200 out of 1,800 jobs at the factory, according to VW's works council.

The proposed structure involving Aurelius and the state of Lower Saxony appears to provide a path for the Osnabrück site’s transition to defense production, following months of reports that Qatar’s investment fund, which holds a 17% voting stake in Volkswagen, was seeking to obstruct the prospective Rafael partnership. Volkswagen took over Karmann’s Osnabrück operations in 2009. The planned transaction is subject to final agreements, corporate approvals, and regulatory reviews.