Automobile giants test the waters in the military industry! Volkswagen Group Germany discusses converting its "struggling factories" into "missile defense component" production

Ask AI · How Can Volkswagen’s Transition to Missile Defense Strike a Balance Between Jobs and Defense-Industrial Strategy?

Volkswagen is in talks with Israeli “Iron Dome” missile defense system manufacturers and plans to shift from the automotive sector to missile defense.

On March 24, citing informed sources, the British Financial Times reported that Volkswagen is in discussions with Rafael Advanced Defence Systems, a state-owned Israeli defense manufacturer, with plans to shift a German factory under its umbrella that is close to closure from car production to manufacturing missile defense system components.

The report said Volkswagen plans to transform the Osnabrück plant in Germany’s state of Lower Saxony into a production base for components of the “Iron Dome” air defense system, with the goal of preserving all 2,300 jobs at the plant and selling the system to governments across Europe.

The cooperation between Volkswagen and Rafael is set to mark the return of the Volkswagen Group to the weapons manufacturing sector. During World War II, Volkswagen produced military vehicles and V1 missiles for Hitler’s armed forces.

According to reports, the German government is actively supporting the plan. If workers agree to switch to weapons production, the relevant production lines could be operational within 12 to 18 months at the fastest.

Plant conversion plan, from making cars to “Iron Dome” parts

The report said that the Osnabrück plant will produce various key components for the “Iron Dome” system, including heavy trucks that carry missiles, launchers, and generators, but it will not involve manufacturing the missile bodies themselves; the latter will be set up by Rafael separately in Germany in dedicated production facilities.

Reporting cited informed sources emphasizing that the additional investment required for this transition is limited. One source said:

Switching to a new production line requires some funding, but that’s quite achievable—it’s the combination of mature (defense) technology and Germany’s manufacturing capabilities.

The outlook for the Osnabrück plant has been precarious. Under the cost-cutting plan Volkswagen finalized in 2024, the plant’s full vehicle production is set to be terminated next year. About 35,000 employees under the Volkswagen Group are expected to leave the company through voluntary departures by 2030.

According to reports, when asked by the outside world, a Volkswagen spokesperson said the company is in discussions with “multiple market participants,” but for now, the future direction of the Osnabrück plant has “no specific decision or conclusion.”

Potential controversy: whether “Iron Dome” fits Europe’s air-defense needs

Even though the cooperation prospects appear to align, some experts have questioned the suitability of the “Iron Dome” system in European battlefield conditions.

The effective interception range of the “Iron Dome” system is about 70 kilometers. Previously, it was mainly used to intercept short-range rockets fired from the Gaza Strip toward Israel. Critics argue that whether the system can effectively address the medium- and long-range threats Europe faces still needs to be assessed.

Israel, meanwhile, has vouched for the system’s broader defensive capabilities. Israel says its layered air-defense system comprises combinations of multiple different systems and has already successfully intercepted more than 90% of incoming missiles.

From an industrial perspective, reporting cited an informed source’s remarks as quite ambitious:

The goal is to save everyone (jobs), and maybe even achieve (revenue) growth—there’s a lot of potential.

But he also admits that whether workers are willing to shift to participate in weapons production is “ultimately a personal choice.”

Germany’s industrial production surplus meets Europe’s rearmament reshuffle

Behind this cooperation are multiple overlapping structural factors. For Rafael, Germany is a strategic foothold for entering the European market.

According to reports, one reason Rafael chose Germany as a European production base is that Germany is among the most steadfast supporters of Israel in Europe. In addition, the company also responded to calls from senior German officials to leverage the country’s idle industrial capacity.

From the standpoint of market demand, after the Russia-Ukraine conflict, European countries have massively reorganized and rearmed, and air-defense capability has become a priority procurement area for many countries.

Germany plans to invest more than 500 billion euros in defense spending by 2030, and officials have clearly identified air defense as a core expenditure direction. Last year, Germany received the first batch of Israeli “Arrow-3” air-defense systems, which were manufactured by another Israeli company, Israel Aerospace Industries.

Rafael has not come to Germany without precedent. The company previously produced “Spike” missiles in Germany through a joint venture with Rheinmetall and Diehl Defence, and produced the active protection system for tanks and armored vehicles, “Trophy.”

Volkswagen has also laid groundwork in the defense sector. Its subsidiary MAN and Rheinmetall have established a joint venture for military trucks.