Volkswagen, the German people's car brand, has decided to stop operations at its core vehicle assembly plant at home and convert it into a defense industry facility that makes interceptor missile parts. Pushed back by low-priced Chinese electric vehicles, Volkswagen is struggling with the worst deficit crisis since its founding. To overcome this, it has joined hands with an Israeli munitions company to make military equipment, a last-ditch measure to preserve regional jobs and revenue. Experts said even Germany, which has treated war as an extreme taboo after two world wars, reached a pragmatic judgment that producing weapons is more advantageous than making cars.
Volkswagen said on the 7th (local time) that it signed a letter of intent to sell its Osnabrück plant in northwestern Germany to the state of Lower Saxony and Israeli-affiliated investment firm Aurelius Capital. It did not disclose the sale price. The plant, which had been scheduled to end vehicle production in 2027, will be transformed into a weapons production base once the sale process is completed. Even if it becomes a munitions plant, about 1,400 of the 1,800 workers who manufactured vehicles at the Osnabrück plant will keep their jobs. The Wall Street Journal (WSJ) reported that this is the first case of Volkswagen handing over an entire German plant to a defense facility.
Aurelius, which secured a majority equity in the plant, plans to pursue a joint venture with Israel's state-owned defense company Rafael. Rafael is the corporations that took the lead in designing Israel's air defense network. The Iron Dome that intercepts rockets and mortar shells, David's Sling that blocks medium-range missiles, and Arrow that intercepts ballistic missiles outside the atmosphere all passed through this company's hands. Volkswagen said, "We plan to produce air defense systems and related parts for Germany and Europe," adding, "This could open the way to additional cooperation and follow-on projects."
Aurelius Capital told Reuters on the 7th, "The Osnabrück plant has long experience handling demanding products, precise manufacturing processes, a well-coordinated, high-quality workforce, and a strong tradition," adding, "Such an asset cannot be created from scratch." Lower Saxony Minister-President Olaf Lies also said, "There has been a fundamental change in the security situation and the need for defense," and stressed, "Germany and Europe must strengthen manufacturing capabilities and become more independent."
Selling the plant, Volkswagen is carrying out its biggest restructuring in 89 years since its founding. Approving the "Future Plan 2030" on the 4th of this month, the Volkswagen Supervisory Board decided to halve production models and cut 100,000 jobs in total by adding 50,000 to the 50,000 already announced. Four core assembly plants in Germany, including Osnabrück as well as Emden, Zwickau, Hanover, and Neckarsulm, have also been put on the table for closure or repurposing. Volkswagen CEO Oliver Blume said, "This agreement marks an important step toward opening a new industrial future for the plant."
Not only Volkswagen but across Europe's auto industry, moves are growing clearer to divert idle facilities to weapons production. Rheinmetall, Germany's largest defense company, has already said it will convert two auto parts plants into military weapons production facilities. From major auto parts corporations like Continental and Schaeffler to commercial vehicle maker Daimler Truck and Deutz, which supplies tractor engines, companies are rushing into defense. According to Reuters, Volkswagen is said to be discussing with local corporations an additional project to convert its commercial institutional sector pickup model into a Polish military vehicle.
The German government is expanding next year's defense budget to 109.7 billion euros (about 171 trillion won) from this year's 82.7 billion euros (about 129 trillion won), boosting demand for defense. Shortly after Russia invaded Ukraine in 2022, Germany also created a 100 billion-euro special fund for the federal armed forces to intensify rearmament. Recently, it has engaged in hostile sparring with Russia over an attempted explosive-laden drone attack at Leipzig/Halle Airport, a key transport hub for munitions. By contrast, Europe's auto market has been in decline each year because of weak demand stemming from the onslaught of low-priced Chinese electric vehicles and an economic slowdown. Volkswagen said its production capacity in Europe exceeds actual demand by more than 500,000 vehicles.
However, this industrial shift has sparked strong backlash, including antiwar protests, not only in Osnabrück but across Germany. Osnabrück is where the Peace of Westphalia that ended the Thirty Years' War in 1648 was signed, and since then it has called itself the "city of peace." Marie-Dominique Guilliard, Spokesperson of the Osnabrück Peace Initiative, said, "This transaction effectively supports the war that the Israeli government is waging against the Palestinians, Lebanon, and Iran." The Spokesperson added, "Eighty years after the last war ended, a weapons factory is rising in this city again," and criticized, "We despair at the decision-makers' lack of historical awareness."
Torben Peters, co-chair of the Left Party in Lower Saxony, criticized the situation in which public funds are being channeled into weapons production. Peters said, "Replacing civilian production with munitions production cannot be the answer to today's crisis in the auto industry," adding, "Given the allegations of massive human rights violations and (Israel's) breaches of international law related to the Gaza Strip war, a particularly rigorous investigation is needed."