VW's Osnabrueck plant would be 'very suitable' for defence production, Rheinmetall CEO says

DUESSELDORF/FRANKFURT (Reuters) - Volkswagen's factory in Osnabrueck would be a good fit for a conversion to military production, the CEO of Rheinmetall said on Wednesday, as the German carmaker considers ways to repurpose the site that could include a sale.

Armin Papperger, speaking to journalists after forecasting strong sales growth for 2025, said that while Rheinmetall could repurpose more of its own automotive plants, buying sites from carmakers under the right conditions was also possible.

Tank factories required heavy-duty cranes and corresponding load-bearing capacities, Papperger said, adding substantial orders, for example for the Lynx infantry fighting vehicle, would be required before investing in new locations.

"Then you can also consider whether a plant like Osnabrueck, which I think would be very suitable, (...) whether you could get involved," Papperger said.

Volkswagen in December said it was exploring alternative scenarios for the site's future use, raising hopes for a sale that could protect workers and save the carmaker restructuring costs.

Papperger's comments come two weeks after Rheinmetall said it would repurpose two of its own automotive sites to mostly make defence equipment, something he said could also happen at some of its other sites.

German defence companies seeking more capacity as Europe prepares to raise military spending are also taking on workers from the ailing car industry, the first sign of a shift that could help revive the continent's biggest economy after two years of contraction.

Papperger said that Rheinmetall was in regular talks with Volkswagen via an existing collaboration in military truck production, adding that while there was no existing concept for Osnabrueck, things could move quickly if conditions are right.

"One thing is clear: before I'll build a new tank factory in Germany, we'll of course take a look at it," Papperger said, adding Rheinmetall could even sell its entire automotive Power Systems division if it got a decent offer.

Rheinmetall, Europe's biggest ammunition maker, owns 51% in Rheinmetall MAN Military Vehicles, with the remainder held by MAN Truck & Bus SE, a division of Traton, the truck maker majority-owned by Volkswagen.

Volkswagen CEO Oliver Blume on Tuesday told broadcaster ZDF that while there were no in-depth talks with the defence industry regarding Osnabrueck, there was ample room for potential options.

(Reporting by Matthias Inverardi, Miranda Murray and Christoph Steitz; Editing by Kirsten Donovan)