German carmaker Volkswagen and Israeli defense company Rafael Advanced Defense Systems are nearing a deal to form a joint venture that would produce components for the Iron Dome air defense system at VW’s plant in Osnabrück, Germany, according to reports published Tuesday.
The two companies have already reached a written agreement and aim to finalize the joint venture by the end of this year, German business magazine WirtschaftsWoche reported, citing people familiar with the process. The report was confirmed by German public broadcaster Tagesschau and Israeli financial outlet Globes.
Under the planned arrangement, the Osnabrück factory — which currently builds the T-Roc Cabriolet — would be converted to produce military trucks, launchers, and power generators for the mobile Iron Dome system. The interceptor missiles themselves would not be made at the site. Those would be manufactured in Israel and the United States and later mounted onto the German-built vehicles.
Rafael CEO Yoav Tourgeman traveled to Germany last week for meetings with government officials in Berlin and company representatives at VW’s Wolfsburg headquarters, according to the reports. A senior Israeli official told Globes that the German government is expected to support the move, partly due to close cooperation with Israel on air defense matters.
A Volkswagen spokesperson declined to comment on the specifics. The spokesperson said the Osnabrück plant has developed various vehicle concepts to explore market opportunities but that no final decisions have been made. The spokesperson reiterated that Volkswagen would not produce weapons.
The Osnabrück plant employs around 2,300 workers and was scheduled to close by the end of 2027 after T-Roc Cabriolet production ends. VW had been searching for alternatives to avoid layoffs. Earlier talks with German defense contractor Rheinmetall about a possible takeover of the plant stalled, and Rheinmetall withdrew from discussions in March.
The components produced under the joint venture would serve European air defense needs, not Israel’s domestic Iron Dome system. The project is linked to the European Sky Shield Initiative, a German-led effort launched in 2022 to build a common air defense framework across the continent. The Iron Dome system has already been sold to Finland, and Greece is reportedly evaluating a purchase.
Volkswagen is under intense financial pressure. The group’s operating profit fell 53.5 percent in 2025 to €8.9 billion, the worst performance in nearly a decade. In March, the company announced plans to cut 50,000 jobs in Germany by 2030.
The talks reflect a broader shift in Germany’s industrial landscape. With traditional auto manufacturing under strain from Chinese competition and weak demand, several companies are exploring defense production. Rheinmetall has already begun converting two of its own automotive plants in Berlin and Neuss for military output.
If finalized, the joint venture could begin production within 12 to 18 months, Defense News reported, though approval from VW’s powerful works council is still required.