Germany, which has long been a key industrial center of Europe, is currently undergoing a significant transformation of its economic model. The country’s globally renowned automakers are actively reorienting their production capacities towards the manufacture of defense products, responding to contemporary challenges and changes in the global market.
This is reported by Finway
Downsizing in the Automotive Industry and Declining Profits
According to official government data, the German industry is losing about 15,000 jobs each month. The automotive sector, which has been a long-time leader of the country’s economy, is feeling this impact the most. Specifically, in 2025, Mercedes-Benz reported a profit decline of 49%. Volkswagen, the second-largest automaker in the world, demonstrated a profit drop of 44% and announced a massive workforce reduction – planning to lay off 50,000 employees by 2030. Porsche reported one of the worst periods in its history: the brand’s operating profit decreased by 98%.
“To avoid bankruptcies, automotive factories are massively retooling their lines to produce defense sector products, including: Volkswagen is already negotiating with Israeli companies to start manufacturing components for the famous ‘Iron Dome’ air defense system by 2027; Schaeffler – one of the leading global manufacturers of auto parts – has created its own defense division, which now produces engines for drones, onboard systems for armored vehicles, and components for military aviation; the German manufacturer Deutz, a leader in internal combustion engine production, now supplies generators for Patriot systems, as well as engines for drones and armored vehicles. As a result, the company not only avoided mass layoffs but also increased its revenue by 15% last year.”
Strategic Reorientation: New Defense Projects
Under economic pressure, automakers are seeking alternative sources of income and intensifying cooperation with the defense sector. Volkswagen plans to start producing parts for the ‘Iron Dome’ air defense system in collaboration with Israeli partners in the coming years. Schaeffler has expanded its operations by creating a defense product division – the company now manufactures modern engines for drones, equipment for armored vehicles, and aviation components. Meanwhile, Deutz supplies generators for Patriot systems, as well as engines for unmanned aerial vehicles and armored vehicles. Thanks to these steps, the company not only avoided layoffs but also increased its revenues by 15% last year.
It is worth noting that the reorientation of industrial giants towards defense production not only helps preserve jobs but also strengthens the position of the German economy amid global instability.