Following the end of World War II, a persuasive engineer named Carl Strandlund developed the famous and ill-fated "Lustron House," still one of America's most interesting and ambitious attempts to mass-produce factory-made housing.

The Lustron House was a one-story, 1,025-square-foot bungalow framed in steel and faced with porcelain-enameled steel panels like those used in gas stations. Houses were to be manufactured and finished totally on a factory assembly line, then shipped and installed on any one of millions of vacant lots throughout the United States. Sold through dealer franchises, the steel houses would be marketed for about $7,000 to the young, employed, expanding middle class.

In 1946, postwar Congress had authorized the Reconstruction Finance Corp. to make loans for producing industrialized housing. Strandlund borrowed $15.5 million, the capital initially thought necessary for the scale of plant and equipment envisioned. His early estimates soon proved too low.

The first Lustron prototype was constructed in 1947. Technically innovative in almost every respect, it used a new, low-temperature process for fusing porcelain enamel to cold-rolled sheet steel. All of its roof, wall and floor sections were formed by cold-rolling or dye pressing. Automatic welding and enameling machines shaped, cleaned, color coated, baked and assembled house components -- steel studs, trusses and interlocking panels -- to form the complete shell. Strandlund also introduced what was then a new insulating material, fiberglass, along with radiant heating panels in the ceiling, to offset the high thermal conductivity of the porcelain-enameled rust-free, no-maintenance steel.

Subsequent design refinements proposed by architect Carl Koch improved the initial Lustron prototype, which had too many small components, joints and gaskets. Site-assembled parts were reduced from 3,000 to 37, primarily by eliminating 2-foot-square panels clipped to studs in favor of larger floor-to-ceiling gasketless panels. Pre-assembled plumbing and storage walls were introduced.

Strandlund was equally innovative in dealing with labor. He wisely invited the American Federation of Labor and craft unions, traditional opponents of prefabrication, into the plant and convinced them that year-round indoor, steady employment was preferable to uncertain, often uncomfortable field conditions.

By the time Lustron Corp. was fully tooled and operating, $33 million had been invested in the enterprise. Lustron's impressive new plant was built on a former Curtis-Wright airplane factory site in Columbus, Ohio. Only one year after starting tool design and installation, 23 acres of equipment were ready to produce more than 100 houses daily using a conveyor moving 20 feet per minute. Lustron could make a finished house every 14 minutes; annual sales revenue could reach $150 million per year.

The May 1949 issue of Architectural Forum commented that Lustron had achieved "the first real plant demonstration of the seductive theory that houses can be turned out like automobiles. But it also means that somewhere in the United States a house customer must arise, waving his mortgage papers, every 14 minutes."

Architectural Forum noted further that Lustron's failure would be "one of the biggest busts in modern business, a bust that would rock Washington and probably end the question of the factory-built house within our lifetime."

Lustron hit the market in early 1949, just as economic recession had set in and much of the postwar peak housing demand already had been met. Nevertheless, people liked the low-cost, precision-detailed house, and orders started to come in from Lustron's dealerships.

Out from the factory went the houses, designed to be erected in 350 field-man hours. With 280 man hours of factory labor, the Lustron House theoretically consumed a total of only 630 man hours of labor. A comparable, conventional house required about 1,600 man hours, a savings of nearly 1,000 hours, easily offsetting the costs of transportation from the factory.

But the labor savings were hard to achieve immediately because of inexperienced field crews and variable field conditions. After purchasing the house from the factory for about $6,000, dealers had to add these unpredictable onsite costs to the lot costs, plus overhead and profit. The result was a $10,000 to $12,000 product, not $7,000 as originally intended. In 1949 dollars, this no longer was low-cost housing.

Other minor impediments were encountered. Lustron's copper piping, today the norm, still was not permitted by some local building codes, which required cast iron. Lustron homes could not be built in Chicago or Detroit, which mandated brick veneer.

The Federal Housing Administration, as always, was inconsistent in its regional underwriting reviews, even though FHA's technical division in Washington had issued the appropriate bulletin of approval. In Tennessee, the FHA office insisted on a door between the kitchen and dining room, while other FHA offices accepted an open, doorless -- and therefore less costly -- plan.

But Lustron's most serious problems were not architectural. The major roadblocks were economic.

Lustron needed working capital of $5,800 per house every 14 minutes to maintain production and pay off debt.

Dealers needed interim construction financing of $6,000 per house for each house they ordered. To sell 20 homes a month -- about five hours of factory production -- a dealer needed at least $120,000 in continuously available working capital, excluding capital required for lot acquisition and improvements.

Despite FHA loan insurance commitments, lenders insisted on "dribbling" out construction loan disbursements as houses were assembled on the site, refusing to finance a "prefab" package in one disbursement transaction.

Neither Lustron nor its dealers had the money or space to stockpile houses and house trailers. Thus, dealers ordered houses only upon receipt of firm commitments from qualified buyers.

Even with a production break-even point of 35 houses per day, Lustron realized that it could survive only if it received volume orders in addition to its fragmented, sporadic dealer orders.

Larger contract orders finally began coming in. Venezuela ordered 60 houses, a group of Cleveland insurance companies planned to build 3,000 Lustron Homes, and, perhaps most promising, the military was considering the Lustron House as its national standard. Here at last was a large, concentrated, annual market whose fulfillment could save taxpayers money.

But time was running out. Expenses were rising faster than income. Just as Lustron was focusing on new mechanisms for dealer and customer financing, including creation of a credit acceptance corporation analogous to those in other industries, Reconstruction Finance officials became nervous and began pressuring Lustron's management. An adverse political climate made matters even worse. In March 1950, Reconstruction Finance foreclosed on Lustron's short-term loans, which were in default, even though the agency previously had promised to consolidate them into a single long-term loan.

Without continuing capitalization, Lustron was doomed, notwithstanding increased orders. After selling 2,700 homes, the bankrupt company closed its doors. Despite pleas and testimony supporting the value of Lustron's concept and product, the administration ordered the plant converted to aircraft production. All of Lustron's equipment was junked or sold off.

At 1951 hearings before the Senate Banking Committee, former Lustron dealer and homebuilder Arthur Padula stated that "we are. . . destroying the last remnants of a $37 million investment in a new industry, which was never given the chance to succeed. The technical problems of manufacturing have been overcome. . . . The only thing wrong with it was it could not be merchandised."

NEXT: Industrialized housing in Europe.