An agreement to save the Volkswagen factory in Osnabrück and turn it into defense industries

The German "Spiegel Online" website revealed (Tuesday, September 8, 2026) that Olaf Leys, Prime Minister of Lower Saxony (from the Social Democratic Party), was finally able to announce a real success after painstaking negotiations regarding an exciting deal. Leis stood outside the gate of the Volkswagen factory in Osnabrück, wearing a dark suit and light blue dotted tie, surrounded by dozens of microphones.

Behind him stood the head of the Volkswagen Works Council, Daniela Cavallo, and the head of the EG Metall union, Christiane Benner, with the Volkswagen Group logo above them.

After months of arduous and strenuous negotiations, the three announced that an agreement had been reached regarding the rescue of one of the Volkswagen factories in Lower Saxony. The prestigious automobile company, in cooperation with the Israeli investment company Aurelius Capital and the state of Lower Saxony, signed a declaration of intent regarding the sale of the Osnabrück site. The factory is scheduled to gradually transform into a center for security and defense solutions.

Exciting "expensive" agreement

The state's prime minister's task has not been easy over the past weeks. He was one of the main figures in the intense struggle over the austerity plan imposed on the group by Volkswagen CEO Oliver Blume. Lower Saxony owns about 20% of Volkswagen's voting rights, and Leys also holds a seat on the supervisory board. That is why he also participated in last week's meeting, which ended, contrary to what many expected, with a surprise settlement rather than escalation.

Leys then tried to present the settlement as his own personal success, as an intermediary between capital and workers. But this settlement may turn into a “Pyrrhic victory,” as it is expected that up to 50,000 additional jobs will be eliminated at Volkswagen in the coming years, the bulk of which will likely be in Germany, and perhaps a large number of them in Lower Saxony. Four factories are still directly threatened, including Hanover and Emden. The prospects for the future opened by this deal are still unclear in many of the company's locations.

From cars to air defense systems

Components for air defense systems belonging to Rafael Advanced Defense Systems will be manufactured in Osnabrück. Rafael produces, among other things, the famous “Iron Dome” system aimed at protecting Israel from missiles. Osnabrück's production is scheduled to focus especially on structures and mobile vehicles carrying defense systems. Most of the jobs in Osnabrück can thus be preserved, although Volkswagen no longer plans to use the plant for car production.

The solution reached within the Volkswagen system is seen as a potential model that can be applied to other threatened sites. The Supervisory Board has officially acknowledged that Volkswagen operates more plants than it needs in Europe. If new prospects are not found, sites such as Emden, Hannover, Neckarsulm and Zwickau may gradually become out of production from 2031. Smart solutions are better than permanently closing factories by taking advantage of the booming defense sector. The production of tanks and air defense systems may contribute to saving jobs that can no longer be maintained through traditional automobile manufacturing.

Where is the Qatari green light?

The Osnabrück factory currently employs about 1,800 workers, most of them in production. The factory includes body manufacturing, paint and assembly departments, producing vehicles for Volkswagen and the group's brands, such as Skoda, Porsche and Bentley. Last spring, information emerged about negotiations between Volkswagen and Rafael. The German-French tank manufacturer KND also showed temporary interest, as did the giant German defense company Rheinmetall, but the two companies eventually backed down. According to Spiegel's information, the main reason behind the lengthy negotiations between Volkswagen and Rafael was Qatar. The Gulf state owns, through its state investment company, 17% of the voting rights in Volkswagen. Qatari officials are usually largely removed from the day-to-day management of the group. But this time the issue was not only related to profits and stock dividends, but also to the geopolitical interests of Qatar as a regional power in the Middle East. The country is not in a state of declared hostility with Israel, but it is said that it has long provided refuge for prominent leaders of the Palestinian Hamas movement, which is classified as a terrorist organization. That is why negotiations continued for months on a formula that would also be acceptable to the Qatari side.

According to Spiegel's information, Volkswagen will have to accept a so-called "negative purchase price," meaning it will have to inject money into the new company, and will also continue to bear part of employee costs during a transition period. Sources within the company report that Qatar initially refused to accept direct cooperation between Volkswagen and the Israeli Defense Industries Company. The new owners are Aurelius Capital and the state of Lower Saxony, with the majority stake remaining with Aurelius. In this way, components could be produced in favor of Rafael without Qatar using its veto power. “Today we are building a long-term industrial relationship with our German partners,” said Rafael President Yoav Torgman. He added that the goal is to produce the technology entirely in Germany in order to protect Germany and Europe.