Volkswagen AG cut its guidance for a second time this year, warning that waning demand will undercut the German carmaker’s profitability as it squares off with unions over possible job cuts and unprecedented plant closures.

Volkswagen cut its annual outlook for the second time in less than three months on Friday, citing a weaker-than-expected performance at its passenger car division as pressure on Europe's top automaker continues to rise.

Volkswagen on Friday cut its annual outlook, citing a weaker-than-expected performance of its passenger car division as well as a deteriorating macroeconomic environment. Europe's largest carmaker now expects a profit margin of around 5.