Volkswagen has signed a deal with Israeli investment group Aurelius Capital to transform its Osnabrück factory from car manufacturing to components for Israel’s Iron Dome air-defence system. Aurelius and Lower Saxony will jointly develop the 125-year-old site as a defence manufacturing hub, with an initial anchor project involving Rafael Advanced Defense Systems. The agreement aims to secure the future of the 1,800 workers at the plant, which was due to end vehicle production next year.

VW’s CEO Oliver Blume called it a step toward a new industrial future for the site. The move marks one of the most high-profile examples of Germany’s struggling automotive sector partnering with the booming defence industry. Berlin plans to spend €700bn on defence over five years, and Rafael hopes to produce Iron Dome technology in Germany.

Workers’ council head Daniela Cavallo said the deal secures jobs for over 1,200 employees.