Volkswagen (VW) is in talks with Israeli defense firm Rafael Advanced Defense Systems about a possible collaboration that would convert VW’s Osnabrück plant from car production to making components for Israel’s Iron Dome air defense system, the Financial Times reported, citing people familiar with the plan.
The FT report says the plan would see production switch at the struggling Osnabrück factory to military vehicles and other non-missile components for the Iron Dome. VW told DW that “the production of weapons by Volkswagen AG remains ruled out for the future, and we do not engage in speculation regarding further plans for the Osnabrück site.” The company added that, with current production scheduled to phase out in 2027, it “continues to explore viable options” and is talking to various “market players” as part of an open review process for the period after 2027. VW said there are no concrete decisions yet and it is keeping local employees informed.
The Osnabrück plant employs about 2,300 people and currently produces the T‑Roc Cabriolet and Porsche Cayman and Boxster models. VW has been seeking ways to preserve jobs at the site since deciding in 2024 to pivot away from current production by 2027; last September it shortened the working week at the facility as part of cost-cutting. The FT report says the proposed conversion aims to save all 2,300 jobs and possibly grow the workforce, though participation would be an individual choice for workers. The report adds that the German government is actively supportive; the state of Lower Saxony holds nearly 12% of VW’s shares and 20% of voting rights.
If confirmed, a tie-up with Rafael would be the largest example so far of a major industrial firm pivoting from automotive manufacturing into the booming defense sector. Since Russia’s full-scale invasion of Ukraine in 2022, European defense companies have grown substantially and governments have ramped up military spending; EU member states spent almost €400 billion on defense in 2025. VW has not previously made a major shift into arms production, though its subsidiary MAN supplies military trucks with Rheinmetall. A move to produce components for Rafael would be VW’s deepest direct commitment to the defense industry since World War II, when the company produced vehicles and bombs for Nazi Germany.
According to the FT, production at Osnabrück for Rafael could begin within 12 to 18 months if approved. The report stresses that the factory would not produce missiles themselves. Potential obstacles include obtaining necessary permits and security clearances and persuading workers to accept a shift to defense-related manufacturing. Paolo Surico, a London Business School economist who studies defense innovation, told DW that industry pivots are “crucial” for ensuring defense spending delivers wider economic benefits, but warned that bureaucratic delays in authorizations could complicate rapid transitions. Hans Christoph Atzpodien of the German Federal Association of the Security and Defense Industry has similarly noted that while automotive workers often have suitable qualifications, retraining and clearance procedures can slow redeployment.
Surico also argued that awarding procurement to multiple firms, allowing each to exploit comparative advantages along the supply chain, would make production more efficient and distribute economic benefits more widely.
The potential Osnabrück conversion comes as VW faces broader financial and structural challenges. Earlier this month the Volkswagen Group said it plans to cut 50,000 jobs in Germany by 2030 after profits fell to their lowest level in a decade. CEO Oliver Blume has told shareholders the group is “operating in a fundamentally different environment.” VW said the Osnabrück plant has been developing various vehicle concepts to explore future market opportunities, but whether these lead to concrete projects remains to be seen.
According to those familiar with the discussions, a sticking point will be whether workers accept switching to defense production. The FT’s account suggests the German government and VW may view a defense-sector pivot as a way to preserve local employment and tap into increased public spending on military procurement, but significant legal, administrative and workforce hurdles remain. Edited by: Srinivas Mazumdaru