Retool Europe: put idle industry to work for defence

On 7 September, Volkswagen announced a proposed sale of its Osnabrück plant, with plans for air-defence production as car manufacturing ends. Days earlier, Germany attributed the attempted August attack at Leipzig/Halle airport to Russia. Industrial contraction and mounting security threats demand a common response. At the October European Council, leaders should launch a targeted industrial conversion programme linking joint defence orders, designs suited to commercial manufacturing and paid retraining. Europe should preserve productive capabilities before they disperse.

The problem extends beyond individual factories. Germany's automotive industry employed 42,300 fewer people in June than a year earlier. High energy costs, Chinese competition and the difficult transition to electric vehicles expose weaknesses in Europe's industrial model. The US trade agreement stabilised trade on adverse terms: the EU removed tariffs on US industrial goods while accepting a 15% US ceiling on most exports. Restoring competitiveness requires stronger demand and investment within Europe, alongside enforcement of the agreement's safeguards.

Retool demand before factories

Defence spending can help, provided governments create a dependable market. As EUISS analysis argues, security investment can also support technological competitiveness. National orders divided among incompatible specifications, however, cannot sustain efficient production across the Union.

Defence ministries, supported by the European Defence Agency, should pool multi-year orders for urgently needed equipment and components, with common standards and firm minimum purchases. The European Defence Industry Programme already supports industrial conversion and common procurement. Its forthcoming rounds should connect viable civilian suppliers to defence customers, with conversion funding conditional on contracts, delivery milestones and competitive costs. Eligible joint purchases can draw on the EU's SAFE procurement loans.

Public support should require opportunities for smaller suppliers and sufficient licensing rights to sustain European production. Banks should use European Investment Bank credit and guarantees to bridge suppliers' investment and working-capital needs before deliveries generate revenue. Joint orders should also strengthen supplies to Ukraine. Conversion plans should include physical and cyber protection, so that expanded capacity can withstand the sabotage threat highlighted in Leipzig.

Retool products for commercial production

Conversion starts at the design stage. Ford's wartime aircraft production at Willow Run demonstrated the potential of automotive manufacturing methods, but required a dedicated factory and substantial training. Today, preserving that industrial contribution requires equipment designed around available production skills, common components and adaptable machinery.

Anduril says its Barracuda-500M can be assembled using ten common hand tools. This concerns assembly, not the manufacture of every component. It nevertheless illustrates a useful procurement principle: production simplicity should be a requirement alongside military performance. European competitions should reward demonstrated production rates, repairability and qualified alternative suppliers. Specialist propulsion, electronics and safety-critical components will still require dedicated expertise. Commercial techniques should reduce avoidable complexity while preserving military standards.

Retool careers before skills disperse

Bulgaria offers a practical test. Bosch plans to close its Sofia engineering centre by mid-2027, affecting around 670 employees, while maintaining other Bulgarian operations. Their engineering capabilities could support defence software, electronics, testing and integration, subject to skills assessment and additional training. Rheinmetall's announced venture with VMZ already demonstrates industrial interest in Bulgaria; a new engineering centre could complement that manufacturing base.

By December, Bulgaria's economy, defence and labour ministries should convene Bosch, employee representatives and competing defence contractors to establish a voluntary transition scheme. They should seek bids for a local engineering and integration centre backed by funded engineering contracts. A prime contractor's sales office alone would offer little. Public support should depend on skilled employment, supplier development and sustained responsibilities in European programmes.

The European Skills Guarantee pilots, launched in July with Bulgarian participation, provide a mechanism to build on. Training should follow identified vacancies and employer commitments, with paid placements and support before redundancy. Security clearances and defence quality requirements must be planned into the transition. Workers should retain a genuine choice, including routes into other growing civilian sectors.

The strongest objection is scale: defence cannot absorb every automotive job or restore European competitiveness alone. Economic research finds that the growth effects depend on investment efficiency, imports and fiscal conditions. Conversion should accompany faster electricity-grid connections, long-term industrial power contracts, integrated capital markets and simpler cross-border business rules. These reforms would also help civilian manufacturers invest. Projects should meet military needs and demonstrate commercial viability. Otherwise, subsidies would merely postpone closures. Yet allowing skilled teams and supplier networks to dissolve would make rebuilding them slower and more expensive.

The 15–16 October European Council should request national conversion plans within three months, followed by initial joint contracts and training placements in 2027. The Commission should align industrial and skills funding, and publish results measured in equipment delivered, productivity and durable employment. Europe's industrial crisis becomes an opportunity only when it produces orders, investment and new work. Retool before the skills are gone.