A U.S. meat supplier said Monday it is laying off most of the workforce of a Chinese subsidiary accused of selling expired beef and chicken to McDonald's, KFC and other major restaurant chains.
Shanghai Husi Food Co. has been under investigation since a Shanghai TV station reported in July it repackaged and sold old meat. Six employees were arrested in August on suspicion of producing substandard products.
Its owner, OSI Group of Aurora, Illinois, said it will lay off 340 people at the Shanghai unit. It said a small number of employees would be kept on while the investigation is underway. The website of Shanghai Husi says it employs about 500 people.
"Over the past two months, Shanghai Husi has experienced significant financial and customer losses," said an OSI Group statement. "It is very unlikely that production will be resumed soon."
The scandal has alarmed Chinese diners and disrupted operations for fast food brands.
Product safety is unusually sensitive in China following scandals over the past decade in which infants, hospital patients and others have been killed or sickened by phony or adulterated milk powder, drugs and other goods.
KFC owner Yum Brands Inc. and McDonald's Corp. said they immediately stopped using products from Husi.
Burger King Corp., Starbucks Corp., pizza chain Papa John's International Inc. and a Dicos, a chain of sandwich shops, withdrew products with ingredients from suppliers that dealt with Husi.
OSI has announced plans for a "quality control center" in Shanghai and said it will spend 10 million yuan ($1.6 million) on a food safety education campaign.
The company announced Sept. 1 it was turning over management of a separate facility in the southern city of Guangzhou that produces vegetable and fruit products to KanPak China, owned by Golden State Foods of Irvine, California.
KFC has broken all ties with OSI Group in China, the United States and Australia.
McDonald's, which has bought meat from OSI in the United States since the 1950s, complained it felt deceived but has said it will stick with the company, possibly because Chinese food processors cannot match OSI's scale and technology.