Israel’s Rafael intends to buy Volkswagen plant in western Germany, sources say

BERLIN, Germany — Rafael Advanced Defense Systems has signed a letter of intent with Volkswagen to acquire the German automaker’s plant in Osnabrueck in western Germany, two people familiar with the matter say.

Both VW, which announced sweeping plans to overhaul its struggling core car business today, and Israeli government-owned Rafael decline to comment. However, VW Chief Executive Oliver Blume tells a call with investors that the group was in advanced talks with defense companies over the plant.

Volkswagen previously said it wants to sell or reconfigure the site, which employs around 2,300 people, as part of a wider revamp, but has ruled out the production of weapons.

The Financial Times reported in March that VW and Rafael were in talks to shift production at the plant from cars to missile defense.

Rafael, one of the main partners in Israel’s Iron Dome, Arrow and David’s Sling air and missile defense systems, would focus on building missile parts including motors rather than on explosives, which, for security reasons, would be built at a separate site, the sources say.

The switch from auto components would reflect German industry’s growing focus on defense as the government in Berlin has set aside hundreds of billions of euros to rebuild the military after decades of neglect.

People familiar with the issue say the German government wanted to ensure it retained overall control over defense technology projects in Germany and that the technology remained in Germany.