Page last updated at 08:30 GMT, Thursday, 4 December 2008

Economic hardship greets The Box in LA

By Matt Frei
BBC News, Los Angeles

The Box
BBC News is following a container around the world for a year to tell stories of globalisation and the world economy.
The Box's journey began in September, transporting Scotch whisky.
It has now arrived in Los Angeles, from China, with a load of health and personal care products, beauty supplies and gardening supplies

I have always liked ports.

There is something romantic about watching giant container ships, packed with cargo as high as apartment blocks plough gracefully into port.

Yesterday we watched at sunset as the Starlight entered the port of Los Angeles, America's busiest and the world's second busiest after Singapore.

The BBC is interested in the Starlight, a vast Panama-registered vessel as long as two football pitches because it has been carrying the BBC Box, a red container stuffed with goods made in China across the Pacific Ocean to the coast of California.

The journey from Sendai in Japan took 10 days.

The 40ft box stands out amongst all the other 40ft boxes because it is bright red and emblazoned with the letters BBC.

It left Southampton last September, packed with Scotch whisky which was sadly offloaded in Shanghai.

It now carries a more humble cargo of measuring tapes destined for New Jersey by train.

Challenging journey

Just in the last few months the Box has braved pirates off the coast of Somalia and typhoons in the South China Sea.

The global journey is less threatening than the dark economic clouds

But the biggest challenge has come from the meltdown in the world economy.

For instance, the charter rates for container ships have plummeted by as much as 60% or more.

A few years ago shipping companies in South Korea, Italy or Scandinavia were enjoying an unprecedented boom.

There simply wasn't enough capacity to ship all the cars, washing machines and lap top computers the world was snapping up.

The shipping companies built new ships, more expensive and bigger then ever before - now they don't need them.


Rajesh Mirchandani was dockside as the BBC Box arrived into port

The port of Los Angeles is the nexus between Asian mass production and American mass consumption, the strange relationship that had fuelled the unprecedented boom of recent years which now seems but a fading memory.

So it is also here that you can take the weakening pulse of the decline in global commerce.

As Patrick Burgoyne, the affable Irish director of container operations here told me, they are seeing more and more containers returning empty to Asia.

The decline in activity has been about 15% and is set to arise as the slow down worsens.

Real economy

But the most striking image of the economic crisis can be found in the neighbouring port of Long Beach.

Cars waiting for buyers
Seas of cars waiting for buyers have become common across the world

This happens to be America's second busiest and the rivalry between the two neighbours is fierce.

Drive into Long Beach port and you notice a vast parking lot filled with brand new cars as far as the eye can see.

These are the Toyotas or Mercedes that were ordered a year ago, manufactured in Japan and Germany and shipped across the High Seas just to languish in an American port.

The car dealerships that were supposed to flog the vehicles to willing consumers no longer want the vehicles because their showrooms are already bursting at the seams with unsold stock.

Americans have come to realize that they don't actually need a new car. They already have one that works perfectly well.

And even if they wanted to get their hands on a new model they would find it much harder.

The leasing system which works a bit like the mortgage market allowed consumers to buy into the American motoring dream with monthly payments but no capital, has ground to a halt with the credit crunch.

The culture of debt has imploded and now tens of thousands of cars are gathering dust in the port.

The steering wheels are covered in protective plastic, the keys dangling temptingly, waiting for buyers that simply don't exist at the moment.

It is a graveyard of unwanted shiny cars. The jilted partners in America's troubled love affair with the motorcar.

Tumbling sales and prices

The numbers are sobering. Foreign car makers such as Mercedes are selling 40% fewer new cars in America than they were a year ago.

US car dealership
Car dealers are struggling across the US

The numbers for American manufacturers such as Chrysler are even more dramatic: down 50%, the worst in half a century.

Just down the road from the port in the town of Long Beach you can see the problem.

They're all offering amazing bargains.

But few are buying. On the windscreen of one Mercedes large pink letters screamed a reduction in price of $30,000 (20,600).

"That's down 15,000 bucks and it is a bootiful mo'tor."

The salesman is Ray Burke, a Cockney in California with a passion for golf who prides himself on his track record in selling Mercedes.

But these days even this master salesman can be lost for a pitch. I asked him how he would try and sell me a car if I was a typical buyer whose house had just lost 60% of its value in the ground zero of sub prime that is California, whose kids were about to go to college and whose job was in jeopardy.

"I wouldn't do that to ya, Matt," said Ray.

A car salesman not trying to sell a car - now that IS a sign of the times.

Inside his plush but empty offices the sellers continue to wait for the buyers. Ray has had to lay off 20 staff in recent months.

From unwilling consumers, to un-bought cars to unemployed workers.

In the Golden State of California, the world's eighth largest economy, that is the new trickle down effect.

Matt Frei is the presenter of BBC World News America which airs every weekday on BBC News, BBC World News and BBC America (for viewers outside the UK only).

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