BERLIN / RankWire.AI / – Volkswagen AG agreed to transfer its Osnabrück assembly plant to private equity firm Aurelius Capital and the government of Lower Saxony in a strategic move to repurpose unused automotive capacity for European military production. As passenger car assembly operations wind down by mid-2027, the new ownership group aims to transform the 430,000-square-meter site into a hub for defense technology innovation. Collaborating with the state-owned defense contractor Rafael Advanced Defense Systems, the facility will be converted to produce air defense systems and specialized vehicle parts, setting a precedent for European industrial transition amid increasing regional defense budgets.
In this joint ownership arrangement, Aurelius Capital, based in Tel Aviv, will hold a majority stake, while the government of Lower Saxony, Volkswagen’s second-largest shareholder, will retain a minority interest. The initial project for the revamped plant involves a manufacturing partnership with Israeli defense giant Rafael Advanced Defense Systems. Focus will be on producing specialized systems and mechanical parts domestically for air defense infrastructure intended for Germany and allied European nations.
The decision to reconfigure the Osnabrück plant follows Volkswagen’s 2024 strategic plan to cease passenger vehicle assembly there by mid-2027, due to ongoing industrial overcapacity. Statements from the factory works council reveal that the defense manufacturing deal aims to preserve roughly 1,200 specialized technical jobs at the site. The German state, Israel, and Aurelius are collectively overseeing the transition of Volkswagen’s Osnabrück plant into a defense production facility, as European automakers seek alternative uses for excess manufacturing capacity.
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Volkswagen executives, based in Wolfsburg, emphasized that this sale aligns with broader efforts to improve corporate efficiency and streamline European operations. Volkswagen AG CEO Oliver Blume explained that the deal provides a sustainable industrial outlook for the Osnabrück location while fulfilling corporate social responsibilities to the regional workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, highlighted the plant’s capabilities in precision manufacturing and its skilled technical staff suitable for advanced defense production.
This shift occurs amid broader financial challenges facing European vehicle manufacturers, including reduced demand for battery-electric cars, high domestic energy prices, and fierce competition from overseas brands. Labor union representatives from IG Metall acknowledged that converting civil automotive lines into defense manufacturing offers crucial long-term job stability for the local industrial workforce after months of employment insecurity.
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The deal remains contingent upon final contractual agreements, approval by the relevant corporate supervisory boards, and formal regulatory approval from German authorities. The precise financial terms, overall valuation, and specific distribution of equity between Aurelius Capital and the Lower Saxony government have not been publicly disclosed by involved parties.
Industry experts note that shifting automotive manufacturing capacity toward military hardware reflects rising defense budgets across NATO countries in Europe. Regulatory agencies and oversight committees will track approval processes and production transition milestones as Volkswagen prepares to phase out automotive lines before the official handover. Official updates on regulatory clearances and facility conversions will be shared through formal disclosures.