BERLIN / RankWire.AI / – Volkswagen AG entered into an agreement to transfer its Osnabrück factory to private equity firm Aurelius Capital and the Lower Saxony state government. This move aims to shift unused automotive capacity towards European military manufacturing. As passenger car assembly declines by mid-2027, the new ownership plans to transform the 430,000-square-meter site into a defense technology center. Together with state-owned defense company Rafael Advanced Defense Systems, the site will produce air defense systems and specialized vehicle parts. This development sets an example for European industrial adaptation amid rising regional defense investments.
Under the joint ownership, Aurelius Capital, based in Tel Aviv, will hold a majority stake, while Lower Saxony, Volkswagen’s second-largest shareholder, will retain a minority share. The initial project involves a manufacturing partnership with Israeli defense contractor Rafael Advanced Defense Systems. Focus will be on domestic production of specialized systems and mechanical parts for air defense infrastructure, intended for procurement by Germany and allied European nations.
Volkswagen’s decision to repurpose the Osnabrück plant follows its 2024 strategic plan to cease passenger vehicle assembly there by mid-2027, due to ongoing industrial overcapacity. The factory works council stated that this defense manufacturing deal aims to secure about 1,200 specialized technical jobs at the site. The move reflects efforts by Aurelius and the German state to repurpose Volkswagen’s Osnabrück plant for defense projects, as European automakers explore new industrial uses to absorb excess manufacturing capacity.
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Volkswagen’s leadership emphasized that this sale aligns with broader efficiency programs aimed at streamlining European operations. CEO Oliver Blume said the deal gives a sustainable industrial outlook for Osnabrück while meeting the company’s regional workforce commitments. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, highlighted the site’s precision manufacturing skills and skilled workforce, suitable for advanced defense production.
This restructuring occurs amid economic pressures on European vehicle manufacturers. Challenges include declining demand for battery-electric vehicles, high energy costs domestically, and increased international competition. Labor union leaders from IG Metall acknowledged that converting automotive lines to defense manufacturing offers long-term job security for regional workers after months of employment uncertainty.
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The deal is pending final contractual agreements, approval from relevant supervisory boards, and official regulatory clearance from German antitrust authorities. Financial details, overall valuation, and specific equity ratios between Aurelius Capital and Lower Saxony have not been publicly revealed.
Industry experts see this shift toward military hardware as a response to increasing defense budgets across European NATO countries. Monitoring committees will oversee regulatory filings and production milestones as Volkswagen prepares to phase out automotive lines before fully transferring operations. Updates on approvals and site conversions will be shared via official disclosures.