Volkswagen to sell German factory for defense production in deal with Israeli firm Rafael

Volkswagen Group, in the midst of a sweeping restructuring, has agreed to sell one of its German factories and convert it into a defense production facility.

Volkswagen said Israeli investment firm Aurelius Capital and the state government of Lower Saxony — the group's second-largest shareholder — have agreed to jointly acquire the Osnabrück plant and use it as a "center of excellence for security and defense," according to Yonhap and the business daily Handelsblatt. Local media reported that Aurelius plans to pursue its first project at the factory with Rafael Advanced Defense Systems, the Israeli state-owned company that produces the Iron Dome air defense system.

Speculation that the Osnabrück plant would pass to a defense company had circulated for some time. Volkswagen had approached Rafael directly about an acquisition, but the proposal ran into opposition from the Qatar Investment Authority (QIA), the group's third-largest shareholder. The joint acquisition structure involving an Israeli investment firm and a German state government is widely seen as a move to sidestep QIA's objections.

The union agreed to the sale on the condition that about 1,400 of the plant's 1,800 workers would keep their jobs through 2029, with efforts to secure employment for the remaining staff as well.

Volkswagen currently assembles the T-Roc Cabriolet at the plant but is set to halt vehicle production there next year under a 2024 agreement with the union. The Dresden plant, whose production shutdown was decided at the same time, is being converted into an AI and robotics research campus by Dresden University of Technology, which has taken it on lease.

Volkswagen's management submitted a restructuring plan to the supervisory board — which includes representatives of the Lower Saxony state government and workers — calling for an additional 50,000 job cuts on top of the previously agreed 50,000, along with a search for new uses for the Emden, Zwickau, Hanover and Neckarsulm plants. The board approved the plan on Sept. 3.

Volkswagen CEO Oliver Blume called the restructuring plan "a strong signal for the future of Volkswagen," adding that the company would "take responsibility for our entire workforce, our suppliers and industrial jobs around the world."