Can Volkswagen really pivot to defence?
Can Volkswagen really pivot into defence? Saskia Koopman examines whether one of Europe’s great industrial names can reinvent itself for an era of rearmament.
For most of its eight-decade history, Volkswagen has stood as a symbol of Europe’s industrial might – churning cars out at scale and underpinning entire regional economies.
But at the company’s Osnabrück megaplant, where production is due to wind down, Volkswagen (VW) is now exploring a future far removed from SUVs and family saloons.
Talks with Rafael Advanced Defense Systems over producing components linked to missile defence systems show that the continent’s industrial titans are running out of easy options.
The pressures bearing down on Volkswagen are by now well-documented. Demand for electric vehicles has proved patchier than optimists promised, Chinese rivals are gaining ground at dizzying rates, leaving German incumbents falling behind on both cost and quality.
The company’s own numbers hold a mirror up to those pressures, with profits tumbling and 50,000 job cuts reportedly on the horizon by 2030.
Meanwhile, defence is heading emphatically in the opposite direction. Governments are globally pouring capital into rearmament, order books appear to be swelling, and political backing shows no sign of wavering.
For firms sitting on idle capacity and a highly skilled workforce, the sector offers viability and growth, two increasingly rare gains in European manufacturing: visibility and growth.
There is a surface plausibility to the idea, with VW’s automotive plants already operating highly complex supply chains and large-scale production – capabilities not entirely alien to defence infrastructure.
The German automobile giant has gone to great lengths to stress that weapons production remains off the table, framing any potential involvement as “defence-adjacent”.
Even so, the move redraws the boundary between civilian industry and military supply chains in a way that would have seemed unlikely just a few years ago.
Various obstacles on the horizon
And yet the distance between aspiration and execution is quite considerable.
Modern defence manufacturing is highly specialised, capital-intensive and tightly controlled. Traditionally, it has also been dominated by incumbents with deep expertise, not to mention in entrenched relationships with governments.
These are not advantages that can be acquired quickly, however capable the new entrant.
New entrants like VW may find a role in the margins, but it is unlikely, at least in the near term, to be transformative.
For the company, the more immediate priority is survival at the plant level. Around 2,300 jobs are currently tied to Osnabrück, and a partnership with Rafael could keep those roles safe, and offer, as well as a credible alternative to closure.
But the complications do not end there. Any tie-up with an Israeli defence giant carried obvious political weight, particularly at a moment when European public opinion on the Middle East is as raw as it is now.
There are ethical considerations, too, for workers asked to move from civilian to military-linked production.
And looming behind it all is Volskwagen’s own history: the company’s involvement in wartime manufacturing still casts a long shadow over any return, however indirect, to the sector.
Europe’s industrial base is being reshaped by various forces that show little sign of relenting. The old reassurances – cheap energy, tech leadership – are under immense strain,
In their absence, companies like Volkswagen are being driven to pursue growth wherever they think it can be found, even when the road leads somewhere they would once have been reluctant to go.