BERLIN / RankWire.AI / – Volkswagen AG has entered into an agreement to transfer ownership of its Osnabrück assembly plant to private equity firm Aurelius Capital and the Lower Saxony state government, marking a strategic shift from automotive production to European military manufacturing. As passenger car assembly ceases by mid-2027, the new owners intend to transform the 430,000-square-meter site into a defense technology center. Collaborating with state-owned defense contractor Rafael Advanced Defense Systems, the site will produce air defense systems and vehicle components, exemplifying European industrial adaptation amid increasing regional defense budgets.
Under the partnership, Aurelius Capital, based in Tel Aviv, will hold the majority of the equity stake, while Lower Saxony, Volkswagen’s second-largest shareholder, will retain a minority interest. The initial key project involves a manufacturing partnership with the Israeli defense firm Rafael Advanced Defense Systems. Focus areas include producing specialized systems and mechanical parts domestically for air defense infrastructure, aimed at procurement by Germany and allied European nations.
This shift comes after Volkswagen’s 2024 strategic decision to phase out passenger vehicle assembly at the Osnabrück plant by mid-2027 due to ongoing industrial overcapacity. According to statements from the factory works council, the defense manufacturing deal aims to preserve around 1,200 specialized technical jobs at the location. The Germany-Aurelius partnership and the state plan to convert the former automotive site into a hub for defense projects, providing an alternative use to absorb excess manufacturing capacity among European vehicle makers.
Rafael Advanced Defense Systems Named as Lead Partner in the Project
Volkswagen’s leadership emphasized that this sale supports their broader efficiency initiatives aimed at streamlining European operations. Volkswagen AG CEO Oliver Blume stated that this deal creates a sustainable industrial future for the Osnabrück plant and meets the company’s commitments to the regional workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, highlighted the plant’s advanced manufacturing skills and experienced workforce, making it suitable for defense production.
This move comes at a time when European vehicle manufacturers face financial pressures such as declining demand for battery-electric cars, high energy costs domestically, and fierce competition from overseas brands. Labor union representatives from IG Metall acknowledged that converting parts of the automotive lines to defense manufacturing could secure long-term employment for regional workers amid prolonged employment uncertainty.
European Overcapacity in Vehicle Manufacturing Drives Corporate Restructuring
The deal remains subject to final contractual arrangements, approval from the relevant corporate supervisory boards, and approval from German antitrust authorities. The parties have not publicly disclosed the purchase price, the overall valuation, or the specific equity share ratios between Aurelius Capital and Lower Saxony.
Industry experts in defense emphasize that shifting automotive infrastructure to military hardware aligns with rising defense budgets across NATO European countries. Regulatory oversight committees will oversee compliance, monitor transition milestones, and review filings as Volkswagen prepares to wind down vehicle production and transfer operations. Updates regarding approvals and site conversions will be communicated via official regulatory disclosures.