Volkswagen considers Israeli arms deal – FT

(SeaPRwire) –   Germany’s troubled industrial base is increasingly shifting toward defense production

German automotive giant Volkswagen is considering repurposing one of its struggling plants to produce components for an Israeli defense company, the Financial Times reported on Wednesday.

Volkswagen’s Osnabruck factory in Lower Saxony is set to halt vehicle production later this year as part of a sweeping cost-cutting and restructuring plan adopted in 2024. The FT reports the company is now in talks with Israel’s Rafael Advanced Defense Systems about converting the site to manufacture parts of the Iron Dome air defense system.

Sources cited by the newspaper said that, if approved, the shift to producing heavy trucks, missile launchers, and power generators – but not interceptor missiles – could take 12 to 18 months. The initiative is reportedly backed by the German government.

Rafael, a state-owned defense firm, is said to have chosen Germany in part because it is “one of the strongest supporters of Israel in Europe.” The company is also exploring another location for manufacturing Iron Dome interceptor missiles.

Germany’s industrial sector has struggled in recent years, with the decision to phase out Russian energy following the 2022 escalation of the Ukraine conflict weighing heavily on its long-term competitiveness. The pressure grew this month after the US-Israeli attack on Iran sent global energy prices surging.

The Middle East crisis has further strained Germany’s auto industry, not only by raising energy costs but also by fueling concerns over aluminum. Major Gulf producers like Aluminium Bahrain and Qatalum have scaled back output, while uncertainty over future shipments has led buyers to stockpile aluminum.

“If the situation continues, there will be more panic buying,” an executive at an aluminum producer told the FT in a separate report. “We have lived through crises in the past, but this one is very different.”

Bloomberg previously reported that Japanese auto parts manufacturers are in discussions with Russian aluminum giant Rusal to secure supplies. European companies, however, face tighter restrictions due to EU import quotas and anti-Russian policies pushed by Brussels and several member states, including Germany.

Defense production tied to Ukraine aid and Europe’s military buildup – amid expectations of a direct conflict with Russia – has become a key driver of the German economy. Companies such as Rheinmetall have reported record earnings as a result.