Volkswagen, Europe's largest automaker, is pursuing plans to convert some of its automobile production lines in Germany into a manufacturing base for components of Israel's Iron Dome missile defense system. The move represents an effort by the automaker to ride the defense industry's growth wave and offset sluggish earnings caused by rigid employment structures and delays in its electric vehicle transition.
The Financial Times reported on Saturday that Volkswagen is in negotiations with Rafael Advanced Defense Systems, Israel's state-owned defense company, to convert its plant in Osnabrück in northwestern Germany into an air defense production facility. The Osnabrück plant, which has been producing vehicles including the T-Roc sport utility vehicle, was originally slated for closure by 2027 under a restructuring plan. Volkswagen, seeking new uses for the site, has turned to Rafael, the maker of the Iron Dome, to attempt a production conversion and find a new path forward. The FT noted that the deal "would be an example of Germany's less profitable car industry joining forces with the fast-growing defense sector."
Volkswagen plans to manufacture key components at the Osnabrück plant, including large trucks, launchers and power supply units used in the Iron Dome system. Interceptor missiles themselves, however, are excluded from the production scope. Rafael is expected to build a separate factory in Germany to produce the interceptor missiles. If plant workers agree to the production conversion, operations could begin within 12 to 18 months. "The production conversion is feasible with a moderate level of investment," an industry official said. "The key is combining proven defense technology with Germany's manufacturing capabilities."
Volkswagen currently produces military trucks through a joint venture between its subsidiary MAN and defense company Rheinmetall. However, the collaboration with Rafael is seen as significant in that it marks the company's first deep involvement in weapons system production since World War II.
Rafael also aims to use Germany as a European production base to strengthen its presence in the regional market, the FT reported. With European nations rearming in the wake of Russia's invasion of Ukraine, Rafael intends to leverage Germany's robust manufacturing infrastructure and pro-Israel stance to expand sales of the Iron Dome system. Volkswagen said it is "in discussions with various partners" but took a cautious stance, adding that "nothing has been decided regarding the direction of the plant."
