Embattled U.S. meat supplier OSI cedes control of China facility

CHICAGO, Sept 2 Tue Sep 2, 2014 5:53pm EDT

CHICAGO, Sept 2 (Reuters) - OSI Group, the U.S.-based supplier at the center of a food safety scandal in China, has handed control of one of its plants there indefinitely to a subsidiary of competitor Golden State Foods Corp, a Golden State spokeswoman said on Tuesday.

California-based Golden State, one of the world's biggest suppliers to fast food companies, will focus on increasing production at OSI's facility in Guangzhou, a city near Hong Kong in southeastern China, spokeswoman Shellie Frey told Reuters by telephone.

The facility produces fruit and vegetable products for customers that include McDonald's Corp.

Frey said the transfer of control to Golden State's KanPak China unit was "a unique situation," adding that it would last indefinitely. She referred questions about the reasons for the management change to OSI.

Representatives of OSI in the United States and China did not respond to an email seeking comment. In a statement issued on Monday, the company said the management change was made "to help meet customer needs."

OSI's meat producing plant in Shanghai was shut down in July over allegations workers there used expired product and doctored food production dates. Last week, Chinese police arrested six OSI employees in connection with the issue, which earlier prompted McDonald's to end supply contracts with OSI in China.

Illinois-based OSI and Golden State both have deep ties with McDonald's that stretch back to the 1950s, when they began supplying food to the U.S. restaurant chain. The suppliers have grown as McDonald's has expanded worldwide.

A McDonald's spokeswoman in the United States had no immediate comment on the management change at OSI's Guangzhou facility.

However, McDonald's has said it will increase the number of audits it conducts of suppliers in China following the OSI food scandal, which hurt China sales at its restaurants and those owned by rival Yum Brands Inc.

Golden State is bringing experts from China and elsewhere to the Guangzhou facility to assure its products meet China's regulatory requirements, Frey said.

She left open the possibility that Golden State could take over management of other OSI facilities, but said there were no talks underway about other plants. (Additional reporting by Lisa Baertlein in Los Angeles; Editing by Dan Grebler)