The Box - Marc Levinson [103]
No figures are available on profits from the Vietnam service, but high capacity utilization must have translated into robust profitability. Each round trip from the West Coast to Cam Ranh Bay brought Sea-Land more than $20,000 per day, and each smaller vessel sailing to Danang took in about $8,000 per day, at a time when MSTS was paying $5,000 per day to lease large breakbulk ships. Sea-Land was also protected against the risk that its containers would vanish into the jungles of Vietnam. A central control office kept track of each container, and containers had to be emptied and returned within specified time limits or the unit holding them had to pay extra charges.28
The contracts also permitted Sea-Land to make some extra profit. The Philippines service was supposed to call at both Manila and Subic Bay, but after Sea-Land threatened to charge $500 an hour for port delays in Manila, the air force decided it could pick up its spare parts just as easily at Subic Bay; the contract remained unaltered, and Sea-Land was able to save $6,800 per trip by skipping the stop in Manila. Sea-Land collected additional revenue any time an army unit in the field restuffed a container with material to be “retrograded” to the United States, because its MSTS contracts were westbound only. These payments for eastbound freight were pure profit and were high enough that in March 1968 the U.S. command revoked permission to retrograde freight via container because, it was explained delicately, Sea-Land’s charges were “not rate-favorable.”29
Malcom McLean was not one to pass up an opportunity for profit. Now, an obvious one awaited. He had six ships, three large and three small, sailing between the U.S. West Coast and Vietnam. Westbound, they were loaded nearly full with military freight. East-bound, they carried little but empty containers. The rates paid by the U.S. government for the westbound haul covered all costs for the entire voyage. If Sea-Land could find freight to carry from the Pacific back to the United States, the revenue would be almost entirely profit. Thinking the situation through, McLean had another of his brainstorms: why not stop in Japan?
Japan was the world’s fastest-growing economy during the 1960s: between 1960 and 1973, its industrial output quadrupled. Already the second-largest source of U.S. imports, by the late 1960s Japan was quickly moving up the ladder from apparel and transistor radios to stereo systems, cars, and industrial equipment. It took little imagination to envision the potential for container shipping. The Japanese government had used a typical industrial policy exercise to endorse containerization in 1966, when the Shipping and Shipbuilding Rationalization Council urged the Ministry of Transport to eliminate confusion and excessive competition in order to derive maximum national benefit from the new technology. The council called for container service between Japan and the U.S. West Coast to begin in 1968, with services to the U.S. East Coast, Europe, and Australia to begin by 1970. It asked the government to build container terminals initially in the Tokyo/Yokohama and Osaka/Kobe areas. The government, the council said, should require Japanese and foreign shipping lines to form consortia to operate the containerships and terminals, but should structure that cooperation to avoid undermining Japanese ship lines. If all went as planned, the council said, half of Japan’s exports would be containerized by 1971, traveling on 12 huge ships carrying 1,000 containers each.30
The government acted with unusual speed. Delegations visited Oakland and other U.S. ports to learn how a containerport should be run. New port legislation