BERLIN / RankWire.AI / – Volkswagen AG agreed to transfer its Osnabrück manufacturing facility to the private equity firm Aurelius Capital and the government of Lower Saxony in a strategic move aimed at shifting underused auto capacity toward European military production. As passenger car assembly wraps up by mid-2027, the new owners plan to transform the 430,000-square-meter site into a center for defense technology. Partnering with the state-owned defense company Rafael Advanced Defense Systems, the site will be repurposed to produce air defense systems and vehicle parts. This aims to set a model for European industrial evolution amid rising regional defense investments.
Under the shared ownership, Tel Aviv-based Aurelius Capital will hold a majority stake in the facility. The Lower Saxony government, Volkswagen’s second-largest shareholder, will retain a minority share. The initial key project involves collaboration with Rafael Advanced Defense Systems, a state-owned Israeli defense contractor. Focus is on producing systems and mechanical parts for air defense infrastructure, mainly for Germany and allied European nations.
The decision to repurpose Osnabrück came after Volkswagen announced in 2024 that it would cease passenger vehicle production at the plant by mid-2027 because of persistent overcapacity. Factory works council statements reveal that the defense partnership aims to create around 1,200 skilled technical jobs at the site. This move marks a trend for European automakers exploring alternative uses for excess manufacturing capacity, as Israel Aurelius and Lower Saxony take over VW’s Osnabrück defense projects.
Rafael Advanced Defense Systems Named as Lead Project Manufacturer
Volkswagen executives highlighted that selling the plant supports broader efforts to improve European operations. Volkswagen AG CEO Oliver Blume explained that the deal offers a sustainable industrial outlook for Osnabrück, while also fulfilling corporate social responsibilities to the local workforce. Representatives from Aurelius Capital, led by Managing Director Tomer Jacob, emphasized that the site’s existing capabilities and skilled workforce make it suitable for advanced defense manufacturing.
This restructuring comes amid challenges facing traditional European automakers, such as declining demand for electric vehicles, high energy costs at home, and increasing international competition. Labor union representatives from IG Metall acknowledged that converting civil automotive lines to defense production is vital for long-term job stability for regional workers after months of employment uncertainty.
European Overcapacity Spurs Automotive Industry Reorientation
The deal is still pending final contractual agreements, approval from supervisory boards, and formal clearance by German antitrust authorities. Financial details, overall valuation, and specific equity shares between Aurelius Capital and Lower Saxony have not been disclosed publicly.
Industry analysts note that redirecting automotive infrastructure toward military hardware reflects increased defense budgets across NATO European nations. Regulatory agencies and oversight committees will oversee filings and key transition stages as Volkswagen prepares to shut down its vehicle manufacturing lines before the plant’s full handover. Official updates on the process will be shared through regulatory disclosures.