economy
Why Citi Thinks a Defense Pivot Could Revive Struggling Volkswagen
German automaker Volkswagen is reportedly in talks with Israeli defense firm Rafael to produce missile defense systems in its soon-to-be obsolete factory.
TL;DR
- Volkswagen is in talks with Israeli defense firm Rafael to produce components for the Iron Dome missile defense system.
- The production would take place at Volkswagen's Osnabrück factory, which is scheduled to close in 2027.
- Citi analysts suggest this pivot could improve Volkswagen's return on invested capital and offer a positive narrative.
- Benefits include saving costs from plant closure, avoiding sales to Chinese competitors, and accelerating defense industry production.
- Potential political risks related to public opinion of such an alliance are flagged.
- Volkswagen states that weapon production remains ruled out for its future and it does not engage in speculation.