Volkswagen: industrial reconversion or shift towards the defense economy?

AA / Chicago / Ayse Betul Akcesme

The possible partnership between the German manufacturer Volkswagen and the Israeli company Rafael Advanced Defense Systems, centered around production related to the Iron Dome missile defense system, is not just an industrial conversion operation.

Presented as a response to the announced closure of the Osnabrück site, this project is part of a broader environment marked by the strengthening of the defense economy in Europe and Germany’s central role in military support to Israel.

According to information revealed by the Financial Times and echoed by several international media outlets, Volkswagen is exploring the possibility of collaborating with Rafael to reconvert its Osnabrück plant to produce components related to the Iron Dome, with the goal of preserving around 2,300 jobs, as the current production is set to end by 2027.

The group’s CEO, Oliver Blume, confirmed in late March the existence of discussions with defense sector players, while seeking to limit the scope. “We are not talking about weapons systems,” he stated in the German press, emphasizing a potential involvement confined to the group’s core transportation activities.

Beyond Volkswagen, several European industrial groups have strengthened their presence in the military sector in recent years, driven by increased defense budgets since the war in Ukraine. Companies like Rheinmetall or Airbus illustrate this growing intersection between civilian and defense industries.

In Volkswagen’s case, however, this direction comes amid an economic downturn, characterized by a significant decrease in profits and costs associated with the transition to electric vehicles.

But the project also rekindles more sensitive debates related to the group’s history. Founded in 1937 under the Third Reich regime, Volkswagen was integrated into the Nazi war economy and extensively used forced labor. According to company archives and historical research, over 20,000 forced laborers were employed in its factories during World War II.

The potential partner, Rafael, is a key player in the Israeli defense industry, particularly through the development of the Iron Dome system. Despite being presented as a defensive system, it operates in a context of prolonged conflict, notably in Gaza, where the UN has denounced war crimes and a potential genocide against the Palestinian people.

Geopolitically, this potential cooperation comes as Germany already ranks among the main arms suppliers to Israel. According to data from the Stockholm International Peace Research Institute (SIPRI), Berlin accounted for 30% of Israeli arms imports between 2019 and 2023, trailing far behind the US (69%), but well ahead of other European countries, whose contributions often remain marginal, generally below 1%.

Germany’s position makes it the primary European actor in providing military support to Israel, within a structure largely defined by the American-German alliance. It also aligns with a political continuity assumed by Berlin, where Israel’s security is regularly framed as a state responsibility, inherited from history and extending well beyond the industrial realm.

The project has also sparked critical reactions. In Osnabrück, the pacifist initiative OFRI has urged Volkswagen to abandon any defense industry cooperation and maintain civilian production, as reported by international press, including The Times of Israel. On the political front, German MP Mirze Edis of the Die Linke party expressed opposition to any military cooperation with Israel in the current context of the conflict in Gaza.

Beyond its historical legacy, Volkswagen is still marked by more recent controversies, such as the “Dieselgate” scandal uncovered in 2015, which highlighted environmental standards circumvention practices and raised governance questions for the group.

In this context, the potential reconversion of the Osnabrück site appears not only as a response to industrial constraints but also as a revelator of a deeper evolution, where economic imperatives, political orientations, and ethical issues intersect in a European landscape where the boundary between civilian and defense industries is fading.