BERLIN / RankWire.AI / – Volkswagen AG entered into 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 convert unused automotive capacity for European military manufacturing. As passenger car assembly operations are phased out by mid-2027, the new ownership group aims to transform the 430,000-square-meter facility into a hub for defense technology. Partnering with the state-owned defense contractor Rafael Advanced Defense Systems, the site will be repurposed to produce air defense systems and specialized vehicle parts, setting a precedent for European industrial adaptation amidst rising regional defense expenditures.
Under the joint ownership agreement, Aurelius Capital, based in Tel Aviv, will hold a majority stake, while the Lower Saxony government, Volkswagen’s second-largest shareholder, will retain a minority share. The initial key project involves a manufacturing collaboration with Israel’s Rafael Advanced Defense Systems, a state-owned defense company. The focus will be on producing domestically specialized systems and mechanical components for air defense infrastructure, intended for procurement by Germany and other European allied nations.
This decision to repurpose the Osnabrück plant follows Volkswagen’s strategic plan for 2024, which includes ending passenger vehicle assembly there by mid-2027 due to ongoing industrial overcapacity. According to statements from the factory works council, the defense manufacturing agreement aims to preserve around 1,200 specialized technical jobs at the site. The collaboration between Israel, Aurelius, and the German state aims to redirect VWs Osnabrück plant’s defense projects as European automakers seek alternative industrial uses to manage excess manufacturing capacity.
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Volkswagen executives highlighted that this sale aligns with the company’s broader efficiency initiatives to optimize European operations. Volkswagen AG CEO Oliver Blume explained that the deal offers a sustainable industrial outlook for the Osnabrück site while fulfilling corporate social responsibilities to the local workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, emphasized that the plant’s existing precision manufacturing skills and experienced workforce make it ideal for advanced defense production.
This shift comes amid wider financial challenges faced by traditional European vehicle manufacturers, including declining demand for battery-electric models, high energy costs in Germany, and stiff competition from overseas automakers. Labor union representatives from IG Metall acknowledged that converting automotive lines to defense manufacturing is vital for securing long-term employment for regional workers after months of employment uncertainty.
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The deal remains pending finalization through contractual agreements, approval from relevant supervisory bodies, and regulatory clearance from German antitrust authorities. Details regarding the purchase price, overall valuation, and the distribution of equity between Aurelius Capital and the Lower Saxony government have not been publicly disclosed by the involved parties.
Industry analysts in the defense sector note that shifting automotive facilities toward military hardware reflects increasing defense budgets across European NATO countries. Monitoring committees will oversee regulatory filings and production milestones as Volkswagen prepares to cease vehicle assembly operations and transfer control of the plant. Official updates on approval processes and plant conversion progress will be shared through formal regulatory disclosures.