A New South Wales bus manufacturer looks set to close after laying off more than 120 staff this week, with their union laying blame on the State Government's decision to buy vehicles overseas.

Key points: Custom Bus manufactures and assembles mass transport buses and coaches and has built some of the vehicles on the road now for Transport for NSW

Custom Bus manufactures and assembles mass transport buses and coaches and has built some of the vehicles on the road now for Transport for NSW The company, based in the western Sydney suburb of Villawood, entered in to voluntary administration on January 18

The company, based in the western Sydney suburb of Villawood, entered in to voluntary administration on January 18 The union believes the company will close, while the administrators say they are still hopeful the company will sell

Custom Bus entered voluntary administration two weeks ago and the Australian Manufacturing Workers Union (AMWU) said 122 staff had been laid off.

The union said 109 production staff from their Villawood factory were made redundant before Australia Day, while another 13 walked off the factory floor for the final time today.

AMWU secretary Steve Murphy said the union organiser had been informed the business would close.

"Our delegate on the job is saying that they've been told the company will close," Mr Murphy said.

The creditors met on Tuesday and a statement from administrators Worrells said they were hoping they would be able to sell the business.

At the time of going into administration, Worrells said the business "fell into financial distress last year as a result of production problems and operational challenges".

Worrells said today they remained hopeful Custom Bus could be sold.

The administrators said they could not comment on how many people had been made redundant.

Union blames overseas bus purchases

Custom Bus went into administration in January. ( ABC News: Gregory Heap )

The AMWU have blamed the closure on the NSW Government's decision to have buses made overseas, most recently in Malaysia.

"We're seeing the last of the buses that will ever be manufactured for the State Government in NSW coming to an end," Mr Murphy said.

A Transport for NSW spokesperson disputed the union's claim that they did not support the local business.

"Since January 2015, Custom [Bus] has been involved in the production of 189 new buses for Transport for NSW contracted operators, while a further 25 buses were in production with Custom when they entered administration," the spokesperson said.

The spokesperson explained they had procured the recent fleet of double-decker buses from outside NSW because there not any manufactured in the state.

The union said 39 administrative and management staff would continue to work at Custom Buses on Monday.

Custom Bus staff in South Australia had not been informed of any job losses at their site in Adelaide, the AMWU said.