BERLIN / RankWire.AI / – Volkswagen AG signed an agreement to hand over its Osnabrück assembly plant to private equity group Aurelius Capital and the state government of Lower Saxony in a pivotal move to pivot unused automotive capacity toward European military production. As passenger car assembly winds down by mid-2027, the new ownership group plans to develop the 430,000-square-meter facility into a defense technology hub. In partnership with state-owned defense contractor Rafael Advanced Defense Systems, the repurposed site will fabricate air defense equipment and specialized vehicle components, establishing a model for European industrial transformation amid surging regional defense spending.
Under the joint ownership arrangement, investment firm Aurelius Capital based in Tel Aviv will hold a majority stake, while the state government of Lower Saxony, Volkswagen’s second-largest shareholder, will maintain a minority interest. The initial key project for the site involves a manufacturing partnership with Israeli defense contractor Rafael Advanced Defense Systems, which is state-owned. Plans focus on producing specialized systems and mechanical parts domestically for air defense infrastructure intended for procurement by Germany and European allied nations.
The decision to transform 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 agreement aims to preserve around 1,200 specialized technical jobs at the facility. Israel Aurelius German state to take over VWs Osnabrueck plant defense projects as European vehicle manufacturers explore alternative industrial conversions to absorb excess manufacturing capacity.
Rafael Advanced Defense Systems Named as Lead Project Manufacturer
Executives at the Wolfsburg-based automaker emphasized that the sale aligns with broader corporate efficiency initiatives aimed at streamlining European operations. Volkswagen AG CEO Oliver Blume stated that the deal creates a sustainable industrial future for the Osnabrück site while fulfilling corporate responsibilities toward the regional workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, highlighted that the facility’s precision manufacturing capabilities and established technical workforce make it well-suited for advanced defense production.
This restructuring occurs amidst broader economic pressures on traditional European automakers, including declining demand for battery-electric vehicles, high domestic energy costs, and increased international competition. Labor union representatives from IG Metall recognized that converting civil automotive lines to defense manufacturing offers vital long-term employment security for regional industrial workers after months of employment uncertainty.
Plans Focus on Addressing Excess Capacity in European Vehicle Plants
The transaction remains contingent upon final contractual agreements, approval by relevant corporate supervisory boards, and approval from German antitrust authorities. Financial details, overall valuation, and specific ownership ratios between Aurelius Capital and Lower Saxony have not been publicly disclosed by those involved.
Defense analysts note that redirecting automotive production toward military hardware reflects rising defense budgets across European NATO countries. Regulatory agencies and oversight committees will track filings and transition milestones as Volkswagen prepares to phase out vehicle manufacturing lines before the official transfer of operations. Updates on corporate approvals and facility conversions will be issued through formal disclosures.