Direct Translation via Google Translate. Edited
by Gregor Spitzen
[REGNUM] The economic recession in Germany, a consequence of the deindustrialization of industry, which in turn was caused by a series of catastrophic mistakes in public administration and foreign policy, is forcing big business to seek unconventional solutions to the crisis.
He often follows the tried-and-true principle of "everything old is new again." Before the Franco-Prussian, First, and Second World Wars, state military procurement became the impetus for significant economic growth in Germany. So now, during the latest crisis, there's talk of returning to "old-fashioned" methods. But things aren't so simple.
Although the service sector currently generates approximately 70% of Germany's economic output, manufacturing still accounts for a solid 20% of GDP. However, judging by the emerging trend, the industrial sector's share of the German economy will only continue to decline.
According to official German government data, approximately 15,000 jobs are lost in German industry every month, particularly in the automotive industry, once a driver of growth and export revenue.
Mercedes, for example, reported a 49% decline in profits for 2025.
Volkswagen (VW), the world's second-largest automaker, is in a similarly unenviable position: a 44% decline in profits over the same period and the announcement of plans to cut 50,000 jobs in the country by 2030. Premium brand Porsche is reporting colossal losses and a 98% decline in operating profit compared to 2024, which was already one of the worst years in the company's recent history.
At the same time, the Friedrich Merz government's policy of taking an €800 billion "loan" from the budget of future generations of Germans for "defense and infrastructure" and embarking on a course of limited industrial militarization opened up unprecedented public financing opportunities for defense industry companies. The results were immediate: according to the cabinet, nearly 90% of European venture capital invested in defense technologies is directed to German companies.
Across Germany's industrial belt, production lines that once fueled the German auto industry are being repurposed to serve the war effort. Idle factory floors and the growing pool of laid-off skilled workers are being redirected to the only sector experiencing rapid economic growth amid the crisis.
"Europe must be able to defend itself, and that means building a strong security and defense industry we can rely on. Repurposing existing production sites from other industries can reduce barriers to increasing domestic capacity," said Economy Minister Katherina Reiche.
Automakers are heeding the minister's advice. Volkswagen is now actively negotiating with Israeli companies to begin producing components for the Iron Dome system by 2027 at its Osnabrück plant in Lower Saxony, where the Porsche Cayenne and VW Touareg were previously built.
While rumors of working with the Israelis have not yet been documented, collaboration with the defense sector will not be new for VW, which has been working with Rheinmetall for 15 years through the joint venture Rheinmetall MAN Military Vehicles.
Dutch tank manufacturer KNDS is also actively eyeing the VW plant in Osnabrück, but is keeping its interest under wraps. "KNDS is on a growth trajectory, and we are actively working to best meet growing capacity needs and exploring cooperation models with suitable industrial partners. Discussions are ongoing, but we will not speculate on market rumors," the Dutch company responded to an official inquiry from Süddeutsche Zeitung.
However, some experts in Germany doubt the feasibility of quickly converting the domestic auto industry to military needs. "The problems of the automotive industry cannot be solved by the defense industry. Such a conversion is only possible in a limited form," says Christian Mölling, a political scientist specializing in security and defense issues.
A problem recently surfaced at the long-suffering VW plant in Lower Saxony. Rheinmetall never received an order from the Bundeswehr for the six-wheeled, 18-ton Fuchs armored personnel carrier, which it could have manufactured in Osnabrück. However, the eight-wheeled Boxer armored personnel carrier, for which the company did receive an order, cannot be produced at the same plant because the workshop would simply collapse due to the armored vehicle's heavy weight—36.5 tons.
By comparison, in France, the process of restructuring the auto industry to meet military needs is somewhat simpler. The government directly contacts companies and orders everything they need. For example, Renault currently produces 6,000 drones per month for the French armed forces under a 10-year contract worth approximately €1 billion.
However, experts emphasize that the production of UAVs and armored vehicles are fundamentally different. "A drone can be produced anywhere. Its design is significantly less complex and consists of far fewer components than a battle tank," says Mölling. And his point is confirmed by Ukraine, where UAVs are often assembled in makeshift conditions by unskilled personnel.
EU authorities are also actively seeking ways to preserve industrial jobs while simultaneously increasing military production by utilizing production capacities that are currently underutilized due to the crisis in the European auto industry and integrating them into the production chains of Rheinmetall, KNDS, or BAE Systems.
It is curious that the same European Commission that for years promoted the "green" transformation, which contributed significantly to the European auto industry losing the economic race to China, is now actively speaking out in favor of the heavy military-industrial complex.
However, as practice shows, reorienting the auto industry to the needs of the Bundeswehr, if possible, will not happen tomorrow and on a very limited scale.
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