Defense Pledges Are Beginning to Alter Europe’s Industrial Base

In the 1940s, many automakers turned their assembly lines over to making military aircraft. None was better known than Ford Motor Company’s Willow Run plant in Michigan that was retooled in 1941 to mass produce the B-24 Liberator bomber. At peak production, one bomber was being rolled out every 63 minutes¹.

Obviously, today’s geopolitical tensions are far less severe than those of World War II. Yet Europe’s NATO allies are in a hurry to re-energize their defense-industrial complex after more than 30 years of the peace dividend that followed the end of the Cold War.

They are learning lessons from history. It was not just Ford that retooled in the 1940s but also Rolls-Royce, the UK luxury car maker, that made engines for the Spitfire and Hurricane fighter planes.

In today’s Europe, the beginnings of this industrial trend are happening again. They are doing so just as some of the continent’s car makers face a struggle as demand for German cars declines against a backdrop of higher energy prices. Some auto manufacturers are welcoming an opportunity to consolidate their activities.

The epicenter of this activity is Germany, long the home of high complexity manufacturing in Europe. However, there’s also some activity in other countries. Defense companies are either taking on the workforces of other manufacturers or looking to acquire their manufacturing plants².

Taking on Workers and Acquiring Factories

For instance, one of the Germany’s largest defense contractor, agreed to take on hundreds of employees from auto supplier Continental in 2024 as its demand for labor grew. Similarly, Hensoldt, the Bavarian maker of radars, entered talks to take on laid off workers at Continental and fellow car parts supplier Bosch at the beginning of 2025.

Beyond Germany, the Belgian government has proposed that the shuttered Audi plant in Brussels be turned over to defense production. It would reportedly be converted to produce armored vehicles and drones, with only a minor overhaul required³.

These cases reflect a broader European trend: the defense industry is increasingly positioning itself as a stabilizing force in regions affected by industrial transition. Automotive suppliers and manufacturers, many of them struggling with the shift to electric mobility, rising energy costs, and global competition, are providing both the skilled workforce and physical infrastructure that defense companies need to expand quickly. Governments, eager to mitigate the social fallout of factory closures, are actively encouraging such transfers as part of a dual strategy to safeguard jobs and strengthen national security.

In practice, this realignment means that defense contractors are not only hiring engineers and technicians with transferable skills but are also inheriting entire ecosystems of suppliers, logistics networks, and plant equipment. Repurposing existing facilities shortens the ramp-up time for new production lines, enabling companies to respond more swiftly to NATO commitments and heightened geopolitical demands.

If sustained, this trend could mark a turning point in Europe’s industrial landscape. Plants once dedicated to civilian mobility may become central to military readiness, and skilled labor once tied to automotive production may increasingly define the future of Europe’s defense economy. However, the future remains uncertain and as geopolitical situation evolves trends may change rapidly.

The Start of Real Change

Ever since NATO members pledged to spend 5% of their economic output on defense earlier in 2025, there has been some skepticism about whether this is achievable. An essay by the respected Stockholm International Peace Research Institute characterized it as more political signal than spending plan⁴.

Yet Europe’s shifting industrial base is the beginning of real change as the continent rebuilds its defense base in reaction to the ratcheting up of geopolitical tension. Ironically, it was the beginning of the Ukraine conflict that made Germany stop buying cheap Russian gas for its manufacturing businesses, contributing to the difficulties of car manufacturers. This prepared the way for the retooling of factories that’s beginning to happen. What will the outcome of this global industrial shift be entirely depends on the partially unpredictable global tensions.