BERLIN / RankWire.AI / – Volkswagen AG agreed to transfer ownership of its Osnabrück assembly plant to private equity firm Aurelius Capital and the Lower Saxony government in a strategic move to redirect unused automotive capacity toward European military manufacturing. As passenger vehicle assembly winds down by mid-2027, the new owners plan to transform the 430,000-square-meter site into a center for defense technology development. In collaboration with state-run defense contractor Rafael Advanced Defense Systems, the facility will produce air defense systems and vehicle components, setting a precedent for European industrial adaptation amid rising regional defense expenditure.
Under the new joint ownership, Aurelius Capital, based in Tel Aviv, will hold the majority stake, while Lower Saxony, Volkswagen’s second-largest shareholder, will retain a minority share. The initial key project involves a manufacturing partnership with Israeli state-owned Rafael Advanced Defense Systems. The focus is on producing specialized systems and mechanical parts for air defense infrastructure intended for Germany and other European nations.
Volkswagen’s decision to repurpose the Osnabrück plant follows its 2024 strategic plan to cease passenger vehicle assembly at the site by mid-2027 due to ongoing industrial overcapacity. Factory works council disclosures indicate that the defense manufacturing deal aims to maintain around 1,200 specialized technical roles at the facility. This move marks a collaborative effort by Aurelius, supported by the German state, to take over Volkswagen’s Osnabrück defense projects amid European automakers exploring alternative conversions to address surplus manufacturing capacity.
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Volkswagen executives stressed that the sale supports broader efficiency initiatives aimed at streamlining European operations. Volkswagen AG CEO Oliver Blume said the deal offers a sustainable industrial outlook for Osnabrück while fulfilling corporate duties to the local workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, highlighted the site’s capabilities in precision manufacturing and its skilled workforce, suitable for advanced defense production.
This restructuring comes amidst broader financial challenges faced by traditional European automakers, including declining demand for electric vehicles, high domestic energy prices, and stiff international competition. Labor union representatives from IG Metall noted that converting automotive lines to defense manufacturing offers vital long-term job security for regional workers after months of employment uncertainty.
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The transaction remains subject to final legal agreements, approval by relevant supervisory boards, and regulatory approval from German authorities. Details on purchase valuation, financial terms, and specific equity shares between Aurelius Capital and Lower Saxony have not been publicly disclosed.
Industry analysts emphasize that shifting automotive infrastructure toward military production reflects increased defense budgets across European NATO countries. Regulatory agencies and oversight committees will track the transition milestones as Volkswagen prepares to phase out its vehicle manufacturing operations before the full handover. Official updates will be issued through regulatory disclosures.