A deal between Israeli company Rafael Advanced Defense Systems and German car giant Volkswagen, which will include the production of parts for the Iron Dome air defense system at a factory in the west of the country, is "close to being signed" and there is already a written agreement between the parties, German media outlets reported today.

According to reports, Rafael CEO Yoav Tourgeman visited Germany last week and met with government officials and senior company executives to receive final approval for the move. A senior Israeli official had previously told "Globes" that he estimates that the German government will support the move, among other things, due to its close cooperation with Israel on air defense issues.

In recent months, reports have emerged in Germany and the UK that the Israeli government-owned company, which manufactures weapons and defense systems, will cooperate with Volkswagen, which is in financial trouble, by acquiring production activities at the Osnabrück plant, which is scheduled to close at the end of 2027. This would mean the layoff of about 2,300, which has sparked tensions between management and the company's powerful workers' committee.

The joint venture

In recent months, Volkswagen has put the factory up for sale and has tried to persuade defense companies such as Rheinmetall, KDNS and Rafael to take over the plant for the production of parts for their systems including the truck chassis that carry the systems as well as other parts. Now, according to a report published today on the "WirtschafWoche" magazine website, Rafael and Volkswagen have advanced to the point where there is already a written agreement between the parties. Last week, Tourgeman met not only with management but also employee representatives at the company's headquarters in Wolfsburg. According to the details obtained by the magazine, Rafael and Volkswagen will establish a joint venture for "production from the chassis level to the parts level for trucks that will be used to carry combat systems."

The plant in Osnabrück will be converted from the production of cabriolet cars to the production of trucks for the Iron Dome system and also for other future systems, such as the Iron Beam laser interception system.

A move that will save many jobs

According to the report, the expansion of the partnership between the companies is being examined to include production of parts in two other Volkswagen plants in Germany, which would join the production chain of the new venture. The interceptors and some of the more sensitive technology will be manufactured in Israel and the US.

Volkswagen CEO Oliver Blume has previously stated that the company will not switch to weapons production but he does not rule out the production of parts such as trucks, command and control vehicles and vehicles for security needs. This position is supposed to neutralize moral opposition from the company's workers' committees.

Production in Osnabrück, according to the reports, will for systems used in Europe only. The Iron Dome system has already been sold to Finland and is in the process of being approved for other European countries such as Greece. Germany has not yet announced any procurement of the system.

The move will save many jobs at the factory, and will provide a lifeline to Volkswagen, which is downsizing and facing financial difficulties due to a major decline in sales. Lower Saxony, from which Defense Minister Boris Pistorius comes, holds 20% of Volkswagen’s shares, and Qatar's sovereign wealth fund holds about 17%.

Published by Globes, Israel business news - en.globes.co.il - on May 13, 2026.

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