A Name Acquired, Another Retired

Britons buy Howard Johnson, bury the MG

English companies provided a pair of bittersweet surprises for the U.S. last week, both involving venerable names, one American and one British.

The orange roofs and the Simple Simon weather vanes above them always seemed as American as, well, an 85-c- slice of Ho Jo's apple pie. But now the Boston-based Howard Johnson chain of restaurants and motor lodges is going British, at least in terms of ownership. Chairman Howard B. Johnson, 47, announced last week that an agreement in principle had been reached to sell the chain's 1,040 restaurants and 520 motor lodges to Imperial Group Ltd., a tobacco, food, beer and packaging conglomerate whose famous brands include Players cigarettes and Harp lager. The bundle from Britain will be $630 million, or about $28 per share for each of the U.S. firm's approximately 22.5 million shares; just before the announcement the stock was selling at about $18.

Howard Johnson grew out of a notions and ice cream shop founded with borrowed money in Quincy, Mass., in 1925 by Howard D. Johnson, the present chairman's father, who died seven years ago at 75. The business prospered largely on the strength of its butter-rich, multiflavored ice cream (calorie count: 160 for a rounded scoop of chocolate chip). Eager to expand but unable to raise much cash during the Depression, Johnson in the early 1930s became a pioneer in the practice of franchising (though today the company owns some 75% of its restaurants). Later the firm plunged into motor lodges, three-quarters of which are franchised.

The restaurants have not tried to match the marketing razzle-dazzle of such newer competitors as McDonald's and Burger King. Also, their prices are as robust (a "Tendersweet Clam Plate" goes for $4.75) as their food is plain. As one old saw puts it, "Howard Johnson's ice cream comes in 28 flavors and its food in one." In motor lodges the company has fallen behind the quality standards of such major rivals as Holiday Inns and Marriott. Though the company has had record sales and profits for four years running --1978's earnings were $33.6 million on revenues of $555 million--gasoline shortages have slowed the growth markedly this year.

Imperial, which is Britain's sixth largest corporation, with earnings of $276.5 million on sales of $7.71 billion in the past fiscal year, first flourished in tobacco and now operates 5,500 pubs and 30 hotels. It has long been seeking a sizable U.S.beachhead. Buying one is relatively painless because the rising pound (it has climbed in value from $ 1.70 to $2.20 in the past two years) has cut the price of U.S. properties. Though Howard Johnson's management will stay on, the firm is expected to be more aggressive in marketing and expanding, notably on the tight little island where Baskin-Robbins already does a licking good business. Says Imperial Chairman Sir John Pile: "I would expect a Howard Johnson's presence in Britain before too long."

For at least two generations of Americans, it was the saucy, two-seat symbol of unfettered youth, an affordable magical machine for Peter Pans of all ages. Its TC midget model, introduced in the U.S. in 1947, with hip-high fenders, a drop-down windshield and a price tag of roughly $2,000, launched the postwar era of the open-topped, wind-in-the-hair sports car. Adoring owners formed clubs around it, raced it and tinkered with it incessantly. Fans still pay up to $17,000 for a model in good condition. But last week Britain's chief automaker, BL (formerly British Leyland), announced that it will soon discontinue the perky little MG.

More than two-thirds of all MGs are bought in the U.S., where the four-cylinder, two-seater $7,195 MGB model is the current favorite. But sales have been slipping. Production has fallen from 46,619 in 1976 to 41,681 last year. Laments BL Chairman Sir Michael Edwardes: "We can't afford to back a loser."

BL, which also makes other well-known cars, including the Jaguar, the Rover and the Triumph, has been stalled by a long history of weak management and skimpy engineering. The firm's strike-prone labor force is a national joke. One wheeze: "Leyland workers don't go to work, they sign the visitors' book." BL has only 20% of the British market.

When the company was nationalized in 1975, the Labor government agreed to pump in about $2 billion by 1980. Sir Michael is expected to ask for still more subsidy, even though the current Conservative government of Margaret Thatcher has vowed not to help industrial "lame ducks."

Britain's union leaders are also in no mood to help. When BL announced that along with scrapping the MG, it will chop 25,000 jobs from its bloated work force of 165,000 and close plants over the next two years, the unions not already on strike immediately began talking about a company-wide walkout.

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