Volkswagen, the state of Lower Saxony and the investment firm Aurelius Capital have signed a framework agreement to sell the Osnabrück plant and convert it into a competence centre for security and defence solutions. The deal, announced on 7 September, ends months of uncertainty for the 1,800-strong workforce and marks a concrete step in Germany's accelerating shift toward defence industrial policy.
Framework deal transfers ownership to Aurelius and Lower Saxony
Under the agreement, Aurelius Capital will become majority shareholder alongside the state of Lower Saxony, taking over Volkswagen Osnabrück GmbH. The purchase price was not disclosed. Car production, currently limited to the T-Roc Cabriolet after Porsche models ended last year, will cease in summer 2027. The site will then be redeveloped in stages for defence manufacturing. The transaction remains subject to final contracts, committee approvals and regulatory clearance.
Aurelius, headquartered in Tel Aviv, has experience restructuring industrial assets. Its managing director Tomer Jacob emphasised that Osnabrück brings "langjährige Erfahrung bei anspruchsvollen Produkten, präzise Fertigungsabläufe und hohe Qualität, eingespielte Teams und eine starke Tradition", capabilities that cannot simply be built from scratch.
Workforce reduction of 600 with core guarantee to 2029
The works council says the agreement offers a future for roughly 1,400 of the current 1,800 employees. After further reductions, primarily through retirement and partial retirement schemes, the new competence centre aims for a headcount of around 1,200. Those 1,200 positions carry an employment guarantee until the end of 2029. The remaining 600 roles will be phased out without compulsory redundancies, according to the parties involved.
IG Metall and the works council negotiated that all existing collective bargaining agreements, works agreements, employment contracts and works council structures will continue unchanged after the ownership transfer. This preserves wage levels and co-determination rights for the transferring workforce.
Rafael partnership brings Israeli air defence technology
The first anchor project is a cooperation with Rafael Advanced Defense Systems, the Israeli manufacturer of the Iron Dome air defence system. Initial work will focus on developing and producing components for air defence systems, with the Osnabrück workforce playing a central role in setting up production and industrialisation. Rafael chief executive Joav Tourgeman stated the goal is to establish full German production of the technology to protect Germany and Europe. The partnership is intended to pave the way for further defence projects under the new entity's roof.
Rheinmetall had previously been discussed as a potential partner for the site. The choice of Rafael signals a willingness to bring non-European defence technology into German production lines, provided the manufacturing and intellectual property remain domestic.
Political imperative drives defence industrial shift
Lower Saxony's minister-president Olaf Lies, who sits on Volkswagen's supervisory board, framed the deal as a response to the changed security landscape. "Deutschland und Europa angesichts der veränderten Sicherheitslage ihre Fähigkeiten stärken und unabhängiger werden müssen," he said, adding that Lower Saxony wants to ensure this creates value and secure jobs. The state's direct equity participation mirrors its role in Volkswagen itself, where it holds a 20% stake and veto rights.
The agreement aligns with Berlin's push to expand the European defence industrial base. The European Defence Fund and NATO's Defence Innovation Accelerator both prioritise domestic production capacity for critical munitions and air defence, areas where Rafael holds leading technology.
Works council secures existing conditions but gaps remain
Employee representatives regard the framework as a relief after years of uncertainty. Daniela Cavallo, chair of Volkswagen's general works council, and Christiane Benner of IG Metall have backed the arrangement for the protections it locks in. However, they acknowledge that no solution exists yet for the remaining employees, particularly those in development roles. The parties say they are working to secure a perspective for the entire core workforce at the site.
From Karmann cabriolets to missile components
The Osnabrück plant traces its roots to Karmann, the coachbuilder that produced the Beetle convertible from 1949 and later the Karmann Ghia. After Karmann's insolvency in 2009, Volkswagen took over large parts of the site, urged by then minister-president Christian Wulff. VW ran it as a low-volume multi-brand facility specialising in niche models and overflow production. With group-wide overcapacity and the cancellation of a planned electric sports car from Porsche, the plant's automotive future had evaporated.
Conditional timeline leaves final steps unresolved
The signed framework is not a completed sale. Next steps include defining exact responsibilities, economic and organisational structuring, and preparing the transition. Final execution depends on binding agreements, governance approvals, including Volkswagen's supervisory board and Aurelius investment committees, and regulatory reviews. The works council will also need to negotiate a social plan and reconciliation of interests for the workforce reduction. A timeline for these steps has not been published.
People mentioned
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Joav Tourgeman
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Tomer Jacob
Organisations
Volkswagen · Rafael Advanced Defense Systems · Aurelius Capital · State of Lower Saxony · IG Metall
