Volkswagen has signed a preliminary agreement to sell its factory in Osnabrück, a city in the northwestern German state of Lower Saxony, to Israeli investment firm Aurelius Capital and the state government of Lower Saxony. From mid-2027, the plant is expected to pivot from automobile production to manufacturing air defence systems and components, in partnership with Israeli defence company Rafael Advanced Defence Systems — the firm best known for developing Israel's Iron Dome missile defence system.
The deal would preserve around 1,400 of the factory's approximately 1,800 jobs, with Volkswagen CEO Oliver Blume praising the plant's workforce for their "expertise, flexibility and dedication." Under the agreement, Aurelius Capital — a Tel Aviv-based investment firm specialising in defence, cybersecurity, artificial intelligence, and critical infrastructure — would become the majority owner, while the state of Lower Saxony retains a co-ownership stake. The financial obligations Niedersachsen is taking on remain unclear. Rafael, which originated as a division of the Israeli military and already supplies equipment to the German armed forces through a subsidiary and joint ventures with German defence firms Diehl Defence and Rheinmetall, is described as the "first anchor project," with further industrial partnerships expected to follow.
The Osnabrück plant, formerly a Karmann factory, has long been designed for small-series production and prototype manufacturing rather than mass-market output — a profile that makes it particularly suited to the precision-oriented nature of defence production. The last T-Roc Cabriolet is expected to roll off the line in 2027. The sale comes amid a broader crisis at Volkswagen, which recently announced plans to cut 50,000 jobs and potentially close four factories across Germany. The Osnabrück deal is seen as rescuing at least one of the threatened sites.
The transition has not been without controversy. Peace activists and environmental groups, gathered under the banner of "Zukunftswerkstatt Osnabrück," expressed disappointment that the factory — located in a city that carries the historical title of "peace city" for its role in the 1648 Peace of Westphalia — would not instead be converted to socially and ecologically sustainable production. Workers' representatives, however, welcomed the outcome, emphasising that employment guarantees and collective wage agreements would be carried over. Reports also indicate that Qatar's sovereign wealth fund, which holds 17 percent of voting rights in Volkswagen, had raised objections to the deal at an earlier stage.
The agreement remains preliminary, with parties having signed a letter of intent and now entering detailed negotiations covering regulatory requirements and internal approvals. Analysts note that the Osnabrück model is unlikely to serve as a template for other VW plants facing closure, given its unique history of specialised, small-batch manufacturing.