A European plan to build a satellite navigation system to rival the U.S. global positioning system is in need of public funds to continue, the European Union said Tuesday.

The estimated $5.4-billion Galileo project has been plagued by delays because of disagreements among the member companies of a consortium asked to run the system.

The companies from France, Germany, Spain, Britain and Italy have been given until Thursday to set up a joint legal entity to run the project or risk losing it, the EU said.

"Galileo is in a profound and serious crisis. We're in a dead-end street," said German Transport Minister Wolfgang Tiefensee, speaking on behalf of the EU.

"The cardinal problem is that the companies still have not been able to agree on the way forward. We need to find an alternative solution."

The consortium companies — EADS, Thales, Inmarsat, Alcatel-Lucent, Finmeccanica, AENA, Hispasat and TeleOp — were appointed two years ago to run Galileo, a joint project of the EU and the European Space Agency.

The European Commission, the administrative body of the EU, is set to make a proposal on May 16 on how to fix the plan, which originally called for European taxpayers to cover about one-third of the costs.

"We will hope to find another form of financing, of distributing the cost [within] a public-private partnership," Tiefensee said.

The Galileo project was originally to have launched 30 satellites — six more than GPS's 24 — by 2008. The project was delayed until 2011 because of questions over how to pay for the system, and Tiefensee said it now likely won't be operational until 2012.

Only one of the 30 satellites has been launched.

The EU has said its system will more accurately detect the positioning of users and will be civilian-run, unlike GPS, which is controlled by the U.S. military but free to use.

With files from the Associated Press