(Bloomberg) -- Volkswagen AG will probably miss a Thursday courtdeadline to reach a comprehensive agreement with U.S. authorities over its tainted dieselengines, possibly exposing the carmaker to daily finesand other sanctions.

While talks have intensified in recent days, Volkswagen and U.S.officials have yet to reach final terms for fixes and compensationrelated to the manufacturer’s cheating on diesel pollution tests,according to people familiar with the negotiations, who asked notto be named because the discussions are private. U.S.regulators want assurances that the repairs will last, as well asthe option for owners to sell the cars back to Volkswagen.Deliberations are continuing, and a last- minute deal could stillbe reached.

VW could seek an extension

The carmaker is facing a deadline set by the U.S. District Courtin San Francisco. Without an agreement, Judge Charles Breyer hasseveral options at a hearing Thursday, including ordering thenearly 600,000 affected cars in the U.S. off the road and finingthe German carmaker each day until it takes action. Volkswagencould also seek an extension to hammer out a deal.

Judge Breyer’s order showed “he really wanted to see somethingconcrete,’’ said Carl Tobias, a law professor at theUniversity of Richmond. “I doubt that he wants to do something sodraconian, but he’s right, this has just dragged on and on.’’

Breyer might delay any penalties or orders until holding anotherhearing, Tobias said. This would give Volkswagen notice on what heintends to do and allow the company to show why such measuresshouldn’t be imposed, he said.

Volkswagen spokesman Eric Felber declined to comment, saying thetalks with U.S. authorities are confidential. Laura Allen, deputypress secretary at the Environmental Protection Agency, declined tocomment. David Clegern, a spokesman for the California AirResources Board, said in an e-mail there’s nothing the agency cansay “at this point.”

Wyn Hornbuckle, a spokesman for the Department of Justice,didn’t immediately respond to a voicemail and an e-mail requestingcomment.

Broad framework

The broad framework of the agreement being negotiated includescreating national and California funds to make amends for past andfuture environmental damage and solutions to reduce the pollutionfrom the affected vehicles or remove them from the road, peoplefamiliar with the talks have said. The cost of buying back all theaffected vehicles could total $9.4 billion, according to BloombergIntelligence analyst Brandon Barnes.

Regulatory fines and lawsuits in the U.S. pose an even biggerfinancial risk. Volkswagen could face a worst-case scenario of $46billion in penalties for equipping diesel engines with softwaredesigned to sidestep emissions tests, according to BloombergIntelligence estimates. A settlement could help reduce thatfinancial hit significantly.

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The scandal has worsened Volkswagen’s already weak position inNorth America, where Europe’s biggest automaker has failed tobecome more than a niche player. The company has been forced tohalt sales of diesel vehicles, which account for some 20% of the VWbrand’s lineup in the region.

A settlement would free Volkswagen to focus more on overhaulingits products and operations in the U.S. Plans include updatingmodels every five years instead of seven, adding sport utilityvehicles and buying more parts locally. And engineers at VW’s onlyU.S. factory, in Chattanooga, Tennessee, will steer the newprojects, reversing the failed pattern of planning cars for theNorth American market at the automaker’s headquarters in Wolfsburg,Germany.

--With assistance from Jeff Plungis and Dana Hull.

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