Malaysian giant Weststar announced last month it had entered into an agreement with LDV's owner, GAZ, to acquire its entire interest in the Birmingham-based firm, which employs 850 workers, with many more dependent on the business.
LDV halted production in mid-December after a huge slump in demand for vans but withdrew an application for administration after the deal was announced, with the help of a £5 million Government bridging loan.
But it was revealed today that Weststar had decided not to go ahead with the deal after being unable to raise funds, raising a huge question mark over the plant's future.
LDV said it had been forced to reapply for administration after essential funds to maintain the business and workforce as a going concern had not being made available.
The surprise move shocked unions and business leaders and led to workers being sent home from the factory ahead of the administration hearing expected to be held in Birmingham next Monday.
LDV said: "The directors of LDV Group have been forced to reapply for administration to protect the assets of the business.
"This is due to the fact that essential funds required to maintain the business and workforce as a going concern are not being made available."
Business Minister Ian Pearson said: "We are disappointed with the news that, despite the bridging facility made available by the Government, Weststar of Malaysia has been unable to proceed with its purchase of LDV.
"We gave LDV a breathing space, a bridge to the future, but in the event, unfortunately, Weststar was unable to cross that bridge.
"This is clearly a worrying time for the workforce and we are ready to offer support to the workers through Advantage West Midlands and the Job Centre Rapid Response Team."
Joe Morgan, regional secretary of the GMB union, said: "This is really bad, unexpected news. GMB will be seeking immediate talks with the management of LDV, with the Government and with Weststar to see what the options for the future are.
"We are firmly of the view that the UK Government cannot stand aside and let these manufacturing jobs go to the wall."
Labour MP Lindsay Hoyle (Chorley), a member of the Business Select Committee, said the Government should now intervene urgently to help save LDV.
"This is obviously a deeply worrying development, not only in the West Midlands but in other parts of the country, including Chorley, which have links to the business.
"We need a more hands-on approach from the Government to make sure that deals like this are successful. We have seen the experience in Germany where direct dealings over General Motors are saving jobs."
A spokesman for the Birmingham Chamber of Commerce said: "We are gravely disappointed at this news. We just hope that something can be retrieved. LDV has been down this route many times before and we hope it can bounce back again."
Liam Byrne, Labour MP for Birmingham Hodge Hill, said: "I'm disappointed that, despite our hard-fought Government bridging loan, Weststar hasn't yet got the finance in place to seal the deal.
"Administration is a setback, but I'm absolutely clear that this is by no means the end of the story. Weststar told me this morning that they are still keen on doing a deal, so our fight for LDV's future goes on.
"Today I'll be corralling LDV management, Unite, Weststar, the Business and Enterprise Department, Advantage West Midlands and the administrator to work out next steps. The bottom line is LDV has a great product - and it's worth backing."
Unite union national officer Dave Osborne said: "After all the hard work which has gone into trying to secure the LDV plant, it is extremely worrying that its future is once again at risk.
"The failure of Weststar to secure financial support from the banks for its takeover of the van manufacturer puts thousands of jobs across the Midlands at risk again.
"We understand that Weststar is now looking to the Government to help underwrite its application to the banks for finance.
"We urge the Government, through Beer, to support this application and do all that it can to help Weststar complete its purchase quickly so that a future can be secured for this plant and its workforce."
Unite said it wanted the Government to draw from the £1 billion set aside to help vehicle manufacturing companies through the recession to underwrite Weststar's application to the banks for funding.
Shadow business minister Mark Prisk said: "This is bad news for workers at LDV and for its suppliers.
"We need to know what's gone wrong. In particular, ministers must say how much taxpayers' money has been lent and whether all of it will be repaid."
It is understood that over £1 million of the £5 million Government aid has been spent, mainly on workers' wages.
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