More than 4,000 jobs at risk as LDV rescue plan stalls

Van-maker calls in auditors after Malaysian buyer fails to find finance

The Malaysian vehicle importer, Weststar, has pulled out of talks to buy LDV, pushing the troubled van-maker into administration and putting more than 4,000 jobs at risk.

Having suspended an earlier application for administration pending rescue by Weststar, LDV's management were forced to re-apply yesterday morning after the Malaysian group admitted failing to find a financial backer.

"Despite substantial efforts and a significant planned investment of its own funds, it has been unable to secure the remaining investment required to refinance the business due to the global financial crisis," Weststar said.

Notwithstanding ambitious plans to "transform LDV into an exciting global business", helped by the launch of an electric version of its Maxus van, the company is understood to have been turned down by three separate potential investors in Malaysia. And last-minute attempts to save the deal floundered when the group's request for an extra £45m from the UK Government was rejected earlier this week as an unreasonable risk for taxpayers' money. Weststar's admission that its forecasts for LDV's future sales had worsened since the bid was first tabled in early May helped stacked the case against further government assistance.

The Government has already put up a £5m bridging loan – of which £1.4m has been drawn – to keep the company afloat while Weststar put together the necessary financing for its bid. The loan was underwritten by Weststar. But when the Malaysian group approached the Government about significant further investment in LDV earlier this week, Weststar said it was unwilling to release any further funds in respect of the loan. With the bid now looking unlikely to succeed and LDV calling in the auditors, the Government wants its money back.

The 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, unfortunately, Weststar was unable to cross that bridge."

The 850 staff at LDV's Birmingham factory are not the only likely casualties of the collapsed deal. Experts estimate that four times as many jobs again will be affected because so many of the parts used in the vans were built elsewhere. Garel Rhys, from Cardiff Business School's Centre for Automotive Industry research, said: "The knock-on effect will be considerable because the 850 LDV workers only account for about 40 per cent of the value of the products, the rest is bought-in content."

LDV's problems are not new. It has not produced a single vehicle since before Christmas and by February the company's management admitted it was "literally running out of cash". Requests for a £30m loan from the Government were rejected, a management buyout plan failed for want of a £5m loan, and by early May the company filed for administration – only to be saved at the 11th hour by the proposal from Weststar.

The extra twist in the tale is that LDV's parent company is Gaz, the Russian van company. Not only is Gaz controlled by Oleg Deripaska, the billionaire oligarch whose Adriatic hospitality to Peter Mandelson, in his previous job as EU trade commissioner, caused such a political furore last September, but Gaz is also named as an "industrial partner" in Magna International's bid for GM Europe, which trade unions fear could spell disaster for 5,000 workers at two British factories.