Volkswagen May Build Iron Dome Equipment at German Plant

Volkswagen, the state of Lower Saxony and Rafael are moving forward with talks on a framework that would allow equipment for the Iron Dome system to be manufactured at the automaker’s plant in Osnabrück, Germany. According to German broadcaster NDR, a memorandum of understanding between the parties could be signed as early as September 7.

The move is intended, in part, to overcome opposition from Qatar’s sovereign wealth fund, one of Volkswagen’s largest shareholders, which holds about 17% of the company’s voting rights. The previous framework for cooperation with Rafael faced resistance from the fund, and a different deal structure is now being considered, one in which Volkswagen would not contract directly with the Israeli defense company.

According to NDR, one option under consideration is for Lower Saxony to take ownership of parts of the plant and establish a joint venture with Rafael. That structure would allow the project to move forward without Volkswagen itself becoming a direct party to an agreement with the Israeli company.

Bloomberg also reported, citing people familiar with the talks, that the sides could reach an agreement in the coming weeks. However, negotiations have not yet concluded, and there is currently no certainty that the deal will ultimately go ahead.

If approved, the Osnabrück plant would not manufacture the Tamir interceptors themselves, the interception missiles launched by the Iron Dome system, but rather support equipment for the system. According to Bloomberg, this would include heavy vehicles designed to transport the system, launchers and generators.

The potential shift to defense manufacturing comes amid uncertainty over the plant’s future. Production of the T-Roc Cabriolet is expected to end at the site in 2027, after which Volkswagen will have no vehicle model slated for continued production in Osnabrück. The factory currently employs more than 2,000 people, making the search for alternative operations significant for their future employment as well.

Earlier reports suggested that the defense project could preserve a substantial share of the plant’s jobs, and sources close to Volkswagen had previously estimated that its scale could make it possible to retain a significant portion of the existing workforce. Still, NDR stressed that it is not yet known how many jobs would actually be secured if the agreement is completed.

The scale of the investment and the deal’s structure have also not yet been determined. According to a report published in Germany by the dpa news agency, an investment of at least €200 million is being considered, including as part of a possible move by Lower Saxony to take a stake in the plant. The state premier’s office, however, clarified that both the investment amount and the corporate structure remain under review, and that no final sum has been approved at this stage.

For the Osnabrück region, the project’s importance goes beyond the number of direct jobs. If no alternative operation is found, the factory is expected to lose its car-production activity in 2027, along with its existing manufacturing capacity, skilled workforce and the related economic activity it generates in the region.

Volkswagen CEO Oliver Blume confirmed that the company is exploring options in the field. He said Volkswagen is in “advanced talks with the defense industry,” adding that, from the company’s perspective, there are “smarter solutions than closing the plant.”

For Rafael, completing the deal could provide the company with a significant manufacturing base in the heart of Europe, at a time when countries across the continent are increasing defense budgets and investments in air defense.