A German factory facing the end of car production could gain a new future manufacturing components for Israel’s Iron Dome. Rafael Advanced Defense Systems, Israeli investment firm Aurelius Capital and the state of Lower Saxony have signed a declaration of intent to transform Volkswagen’s Osnabrück site into a defense production center serving Germany and Europe.

Under preliminary sale terms announced by Volkswagen, Aurelius would become the majority owner alongside Lower Saxony. Rafael would supply air-defense expertise, while the plant’s skilled workforce would help establish manufacturing operations. The proposed transaction remains subject to final agreements, corporate approvals and regulatory reviews.

The production distinction matters: Osnabrück would manufacture launchers, military vehicles, generators and other supporting equipment, not Iron Dome’s Tamir interceptor missiles. The project would bring part of the Israeli system’s industrial infrastructure to Germany rather than turn the factory into an interceptor assembly line.

For workers, the proposal offers an alternative to the approaching end of vehicle production, scheduled for summer 2027. Volkswagen’s works council chair, Daniela Cavallo, said the agreement creates employment prospects for more than 1,200 people, while efforts continue to secure a future for the remaining workforce.

The ownership arrangement also follows a political obstacle. Israeli business newspaper Globes reported that Qatar, a major Volkswagen shareholder, opposed an earlier plan for direct cooperation between the automaker and Rafael. The proposed sale offers a route around that resistance, placing the defense venture under new ownership rather than keeping it inside Volkswagen.

The broader industrial logic is increasingly clear: Germany’s struggling automotive sector has factories and manufacturing expertise, while Europe’s rearmament is creating demand for defense production. Reuters reported that Volkswagen sees the Osnabrück arrangement as a potential model for other sites facing weak demand, high costs and growing Chinese competition.

For Rafael, the ambition extends beyond rescuing a single factory. CEO Yoav Tourgeman described a long-term manufacturing relationship intended “to protect Germany and Europe.” Lower Saxony’s government said the partnership would combine Israeli defense technology with German engineering, production capacity and quality standards.

Iron Dome is designed to protect communities, military forces and critical infrastructure against rockets, mortars, drones and other aerial threats. Its selective interception approach distinguishes threats heading toward defended areas from those expected to land harmlessly elsewhere.

Germany has already committed billions to another Israeli air-defense system, Arrow 3. Manufacturer Israel Aerospace Industries announced a $3.1 billion expansion of that agreement earlier this year, bringing its overall value to more than $6.5 billion.

The Osnabrück announcement is not itself a German purchase of Iron Dome, and no firm defense-production start date has been announced. But completing the project would give Israeli technology a larger manufacturing foothold in Europe, with German industrial jobs tied directly to strengthening the continent’s defenses.