From the V1 to Iron Dome

Volkswagen is in talks with Israeli defence group Rafael Advanced Defence Systems over converting its Osnabrück plant to produce components for the Iron Dome missile defence system. The company whose Wolfsburg plant produced V1 fuselage sections from 1943 onwards, operating a secret department in the basement of Hall I for precisely that purpose, may soon manufacture Israel's rocket shield. No novelist would dare.

I. Osnabrück

The Osnabrück plant employs 2,300 workers and has been facing closure for months. It produces convertibles — the Porsche 718 Boxster and 718 Cabriolet — in modest volumes for a shrinking niche market. Volkswagen has no new platform to build there. The capacity exists; the demand does not.

That is the starting point. The rest is geometry.

Rafael, the Israeli state-owned company that developed and operates the Iron Dome system, is seeking European production partners. Several European governments want to purchase the system — or at least its components. The demand is real, the political will is present, and the German government is actively supporting the proposal. "The aim is to save everybody, maybe even to grow," one person familiar with the plan told the Financial Times. "The potential is so high."

And then the sentence that deserves to be quoted of the year: "But it's also an individual decision for the workers if they want to be part of the idea."

Eighty years after the end of the war, an automotive group is asking its workers whether they want to build missile defence components. Voluntarily. As an individual decision. As if it were one.

II. The Historical Weight

In an earlier essay on this site — "VW — Back to the Roots" — we described the basic structure of this story: The Wolfsburg plant was built in 1938 on Hitler's orders for the "Kraft durch Freude" car — a civilian promise that was never kept. The factory built military vehicles instead. The Beetle came only after the war, under British occupation administration, as the symbol of a new beginning.

That new beginning was a promise: we build no more weapons. We build cars. The Beetle to Mexico, the Golf to America. Harmless, civilised, economic-miracle-ish.

This promise is now dissolving — not as a decision, but as a consequence. Not because anyone chose it, but because the market demands it. And the market has no memory.

What distinguishes the Osnabrück deal from anything that came before is the historical inversion. The VW plant in Wolfsburg was built in 1938 for the "Strength through Joy" car — a civilian promise never honoured. During the war it produced Kübelwagen, Schwimmwagen and — from 1943, in a secret department in the basement of Hall I — fuselage sections for the V1 flying bomb, the weapon that terrorised London. All of it produced with forced labour. The Iron Dome is the opposite: a defensive system that intercepts rockets before they reach civilians. And it is Israeli — developed by the state that emerged from the Jewish catastrophe to which the VW plant contributed.

One can read this as reconciliation. One can read it as irony. One can also simply read it for what it is: structural logic overwriting history, because history is not a business model.

III. The Logic of Conversion

In "Münchhausen's Heirs" we described how German industry has been performing a moral volte-face since 27 February 2022, remarkable in its speed. Bosch, which had on principle avoided the defence industry, is now "carefully examining the opportunity." Trumpf, whose owning family had excluded arms business in the company's articles of association, speaks of a "Zeitenwende within the company." The number of businesses wanting to convert their production to defence has nearly doubled in a year: from 243 to 440.

Volkswagen fits this pattern — but with a particular quality. The other converts are following abstract demand. VW is following a concrete one: 2,300 jobs, a specific plant, an Israeli partner, a Europe-wide sales market. This is not a strategic decision for the defence industry. It is an operational decision for Osnabrück.

The question that goes unasked: what happens when Iron Dome is sold, European demand is saturated and the political climate shifts? What does Osnabrück do then? Can a plant converted to missile defence components be reconverted to convertibles? Does this create a structural dependency on military demand — a dependency that, as history shows, tends to reproduce itself?

The defence industry is not a tap you can turn on and off. It creates dependencies, interests, lobbies. It creates people whose livelihoods depend on conflict.

Germany has tried this experiment twice. Both times it ended catastrophically. This is not a forecast for today — the contexts are fundamentally different. But it is a structural argument that does not disappear simply because the intention this time is defensive.

IV. What the Special Fund Really Buys

The deal cannot be understood without the political environment we described in "The Special Un-Fund II". A defence budget of 108 billion euros in 2026. 377 billion euros in planned Bundeswehr procurement. European governments able and willing to buy air defence systems because the political appetite for debt is greater than it has ever been.

Into this space falls the Osnabrück offer: a European production centre for Iron Dome components, combining VW's mass-production expertise with Israeli systems competence and serving European demand. The deal is not irrational. It follows a clear logic: demand is there, capacity is there, political tailwind is there.

What goes unasked: how much of the special fund actually lands in additional defence capability — and how much ends up in structures that become self-perpetuating? How much would be better invested in European-coordinated procurement rather than national one-off solutions? The procurement system through which these billions must flow was dysfunctional before the decision — and remains so. Pouring billions into a broken system does not fix the system.

But that is the question that needs time. Osnabrück needs an answer now.

V. Debt for Consumption — the Münchhausen Problem

Behind the specific case of Osnabrück lies an economic question that political debate consistently sidesteps: what does an economy actually buy when it goes into debt for armaments?

The answer is uncomfortable. Defence goods are consumer goods — not investment goods. A tank produces nothing. A missile creates no added value. Borrow money for a factory and tomorrow you have a factory that produces, generates profit, pays taxes, secures jobs. Borrow money for ammunition and tomorrow you have spent ammunition. And the day after, the debt.

Germany has run this experiment twice. Both times it ended in catastrophe — not despite the initial success, but because of it.

The first time: the war bonds of the Kaiserreich from 1914. Nine tranches in four years, totalling around 100 billion marks. The financing of the war on credit, with the expectation that victory would pay the debts. Victory did not come. The debts remained. The hyperinflation of 1923 destroyed them — along with the savings of millions of Germans.

The second time: Hjalmar Schacht's Mefo bills from 1933. An ingenious construction: the Metallurgische Forschungsgesellschaft mbH — a shell company, four employees, no business — issued bills of exchange with which arms contracts were paid. The Reichsbank discounted them. No entry in the official national debt, no parliamentary oversight, no public awareness. Six years, 12 billion Reichsmarks, hidden inflation. The Wehrmacht was equipped. The rest is history.

Today the instrument is called a "Sondervermögen" — also a construction that disguises its debt character linguistically, secures it constitutionally, and was passed with a two-thirds majority. More transparent than the Mefo bills, certainly. But the same structural problem: an economy trying to pull itself out of the structural swamp by its own debt bootstraps, booking consumption as investment.

Some never learn — and others even later. After us the deluge. We will keep marching.

The difference from 1914 and 1933 is real: the threat is real, the democratic legitimacy is real, the intent is defensive. But the economic logic is the same. Rearmament debt generates no productive capacity to repay it. It generates dependencies: on further borrowing, on sustained military demand, on a political climate that can change — but will then leave behind an industry that can no longer change.

VI. The Individual Decision

Back to the sentence that says everything: "It's also an individual decision for the workers if they want to be part of the idea."

This sounds like respect for the workforce's autonomy. It is something else. It is the transfer of responsibility onto the individual, at a moment when the structure has already made the decision. If the plant closes, there is no individual decision. If the plant is converted to Iron Dome, there is one: participate or not, with all the consequences for one's own job.

This is not a choice. It is a frame within which a formal choice is offered. The same pattern recurs throughout industrial history: when Volkswagen produced armaments during the war, the forced labourers had no choice. Today the workers have one — a real one, not a formal one. But the frame within which that choice arises was set by others: by Chinese competition, by the shrinking convertible market, by the European rearmament cycle, by the Israeli state company, by the German federal government actively lending its support.

The individual decides — but over the space of that decision, he had no say.

VII. The Third Act

In "VW — Back to the Roots" we asked what a factory does that was built for Hitler's Volkswagen, became the symbol of civilian prosperity during the economic miracle — and now stands again at a crossroads. The answer in Wolfsburg: electric cars, under pressure. The answer in Dresden: closure. The answer in Osnabrück: Iron Dome.

This is not a relapse into the past. It is something new — and yet structurally familiar. The factory follows demand. Demand follows money. Money follows politics. And politics follows the history it claims to be preventing.

Rheinmetall is today worth more than VW. That is not a stock-market footnote. It is a structural indicator: the market is saying what the coming decade will produce. VW is listening — in Osnabrück.

The economic miracle was the era in which Germany forgot what its industry had originally been built for. Now it is remembering — not out of malice, but because the market demands it.

The Beetle was more than a car. It was the promise that industry and mass production could stand on the right side of history. The Iron Dome in Osnabrück would be the end of that promise — not as a defeat, but as an evaporation. The promise is not broken. It simply is no longer needed.

VIII. What Remains

The story this deal writes is not an indictment. It is a diagnosis. When civilian demand collapses and the state builds military demand, productive capacity follows the money. That is economics. And economics has no memory.

What does have memory is reflection. The question that arises — not to prevent the deal, but to understand what it means — is this: when Volkswagen produces components for Israel's missile defence system, is that a sign that Europe is finally taking its own security seriously? Or is it a sign that Europe no longer has any idea what to produce — except whatever is being paid for right now?

Both can be true simultaneously. That is the unease this deal leaves behind. Not the historical irony — that is merely a blunt joke. The real unease is structural: an industry that can no longer find a future in the civilian sector finds it in the military one. And nobody asks what that says about the future — except the 2,300 workers in Osnabrück, who are now permitted to decide individually.