BERLIN / RankWire.AI / – Volkswagen AG reached an agreement to transfer its Osnabrück assembly plant to private equity firm Aurelius Capital and the Lower Saxony state government, marking a strategic shift to redirect unused automotive capacity toward European military production. As passenger car manufacturing diminishes by mid-2027, the new owners plan to transform the 430,000-square-meter site into a defense technology hub. Collaborating with the state-owned defense contractor Rafael Advanced Defense Systems, the revamped facility will produce air defense systems and specialized vehicle components, setting an example for European industrial adaptation amid increasing regional defense budgets.
Under the new joint ownership, Aurelius Capital, based in Tel Aviv, will hold the majority stake, while the Lower Saxony government, Volkswagen’s second-largest shareholder, will retain a minority share. The first key project at the redeveloped site involves a manufacturing partnership with Israeli defense giant Rafael Advanced Defense Systems. The focus is on domestic production of specialized systems and mechanical parts for air defense infrastructure, aimed at serving Germany and allied European nations.
The decision to repurpose the Osnabrück plant follows Volkswagen’s 2024 strategic plan to cease passenger vehicle assembly there by mid-2027 due to ongoing industrial overcapacity. According to statements from the factory works council, the defense manufacturing deal is expected to safeguard roughly 1,200 specialized technical roles at the site. This move reflects a broader trend among European vehicle manufacturers exploring industrial conversions to absorb excess manufacturing capacity, with Israel, Aurelius, and the German state collaborating on defense projects.
Rafael Advanced Defense Systems Named as Lead Project Manufacturer
Volkswagen’s leadership emphasized that this sale aligns with wider corporate efficiency initiatives aimed at streamlining European operations. Volkswagen AG CEO Oliver Blume explained that this deal provides a sustainable industrial outlook for Osnabrück, while also fulfilling the company’s responsibility toward the regional workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, highlighted that the facility’s capabilities in precision manufacturing and its skilled workforce make it suitable for advanced defense production.
The move comes amid financial pressures on European automakers, with declining demand for battery-electric vehicles, high domestic energy costs, and growing overseas competition. IG Metall labor union representatives pointed out that converting civil automotive lines to defense manufacturing offers crucial long-term employment security for regional workers after months of employment uncertainty.
European Vehicle Manufacturing Capacity to Be Reassessed Through Strategic Restructuring
The deal is contingent upon finalizing contractual documents, approval from relevant corporate supervisory boards, and clearance from German antitrust authorities. Financial specifics, overall valuation, and equity split between Aurelius Capital and Lower Saxony have not been publicly disclosed by the involved parties.
Industry experts note that shifting automotive infrastructure toward military hardware aligns with increasing defense budgets across European NATO countries. Regulatory bodies will oversee filings and transition milestones as Volkswagen prepares to cease vehicle production before full operational handover. Updates on approvals and conversions will be made through official disclosures.