Volkswagen AG shares declined after outlining weaker-than-expected third-quarter earnings and hedging losses.

Europe’s biggest carmaker now sees operating return on sales for the year as low as 7%, from at least 7.5%, it said late Friday.

The company said higher costs for its volume brands and supply-chain issues held back the momentum it needed in the second half to offset the €2.5 billion hedging loss.

Shares fell more than 3% in early trading.

VW managers and labor representatives are currently negotiating cutbacks to make its bloated namesake brand more competitive. Local startups are quickly snatching away market share in China, and demand in Europe is weakening.

The company already slowed EV output at some sites, including its Wolfsburg headquarters last month after flooding in Slovenia impacted one of its suppliers. The carmaker last week said orders have fallen short of targets after weak demand particularly in Europe.