ARCHITECTURAL forum
MAGAZINE OF BUILDING
MAY 1949

The factory-built house is here, but not the answer to the $33 million question:
How to get it to market?


Life: A. Haug

In the vast Lustron plant outside Columbus, Ohio where Curtiss-Wright used to taxi fighter planes out the back door, there are now 23 acres of presses, furnaces and high-speed welding machines. If you open a door and step out on a balcony near President Carl Strandlund's big executive office, your ears will be assaulted by the throb and pound of the big presses, the clash of steel against steel, the sigh of the blowers - the familiar and auspicious rumble of mass production. Within this various rumble, it is possible to distinguish a rythm: this is the continuous movement of the conveyor belt which carries the steel parts of the Lustron house. This conveyor moves at the inexorable speed of 20 ft. a minute.

Now this speed of 20 ft. a minute means a number of things. In the first place, it means that 100 porcelain enameled steel houses can be produced every 23 hours of continuous operation - or one house every 14 minutes. It means that around $33 million - the largest capital stake yet risked on the old U.S. dream of a factory-built house - is enough to pay for a plantful of the most modern steel-working equipment available and to hire men to put this machinery in operation. It is 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 U.S. a house customer must arise, waving his mortgage papers, every 14 minutes.

Engineer Carl Strandlund, having performed the feat of tool design and complete plant installation in a mere 12 months, has proved beyond any doubt that it is possible to mass produce a house in a factory. Over the next few months, he will have to prove that he can mass distribute it.

If Strandlund can get his house up on foundations and into the hands of customers at a speed that will match the speed of his conveyor, he may have something much more than the answer to the nation's housing problem and a gross turnover of $150 million a year. He may have a new industry that will have the expanding effect on the whol U.S. economy that the automobile once had. By establishing a means of high-level, year-in and year-out housebuilding, he may forever end the threat of a recurring boom-and-bust cycle in the construction industry. If he can't, he may have one of the biggest bust in modern business, a bust that would rock Washington and probably end the question of a factory-built house within our lifetime. As Senator Ralph Flanders put it: "If Lustron doesn't work, let us forever quit talking about the mass-produced house."

Strandlund's fantastic compression of the six months required to build a single house by conventional methods promises to be as much at home in the housebuilding industry as a jet-propelled wheelbarrow. Although the big operative builders have already considerably shortened the time normally required to build a house, the many processes accessory to housebuilding have remained conspicuously unaffected. Thus it still takes so many weeks to get a map through the zoning commission, so many weeks to get differences between local and FHA requirements ironed out, so many weeks for the bankers to make up their minds, so many days to satisfy the local building inspector, so many days to get the FHA inspector to come out and look at the plumbing wall. And, even more important, it takes so many weeks or months or years for the customer to accumulate enough money to make a down payment on a new house.

Last month, as the last 600-ton automatic press was bolted into place on the plant floor, some 143 dealers held Lustron franchises. Compared with what is ahead, a mere handful of houses - about 450 - were up or going up on customers' orders. Half of the 60 houses ordered by the Navy for Marine officers and enlisted men at Quantico were finished - and here Lustron had hit its target of 350 site man-hours per house. So far the problem had been production: there had not been enough houses to get dealers started, As automatic machinery was installed to displace hand operations in the plant (example: synthetic rubber gaskets were stapled by hand around panels until the machine which fuses them electrically arrived in March), houses were shipped with parts short. These shortages, plus the fact that substitue handmade parts did not always fit, had made a realistic gauge of site man-hours impossible on most of the houses erected in the early months of this year.

During these months of tooling, Lustron's biggest distribution problem had been how to explain shortages and non-delivery to the dealers already franchised and how to appease the thousands of clamoring customers who had poured through the demonstration houses opened in some 100 cities and read the big ads which Lustron had placed in leading magazines and newspapers. (Last month one irate customer, who put a down payment on a Lustron house ten months ago and had not yet been given a firm delivery date, brought suit against Lustron's New York dealer.) Now with the last of the automatic machinery in place - even the 1,800-ton press which draws out a steel bathtub in one continuous forming process was set up - Lustron was ready to pull the switch that means 100 houses a day. And the heat was finally where many a bankrupt factory houser had known it would be - on the dealers.

Close to the American heart

As the Lustron house came up for its decisive test in the hands of the dealers, there were two strikes against it. One of these was time and the other was price. Lustron had missed the peak of the housing market: the back of the housing shortage had been broken and there were no longer six customers for every house-for-sale sign. What urgent market pressure remained was in the low cost bracket - and Lustron's price to the dealer, counting freight, was around $6000. For the price to the customer, the cost of the site labor, land and utilities had to be added. In Wisconsin, Lustron houses on lots were selling for $10,000, in Illinois for $11,000, in New York for $10,500, in Connecticut for $11,000. These prices were not low cost houses. Without some additional financing steam from Lustron, they were not prices low enough to persuade dealers to take the risk of building the houses without a down payment from a waiting buyer. In other words, even the limited mass distribution formula devised by the merchant housebuilder - who puts up a number of houses at once and takes the risk that he can find customers - was not yet working for Lustron.

Counterbalancing these factors was a simple and probably overriding fact: The Lustron house had enormous market appeal. Far from showing any dislike of the standardization of a machine-made house, well-heeled customers were taking to the house with something like the passion Americans have given to automobiles. The porcelain enamel finish, which Strandlund applies at a cost of 10 cents a sq. ft. (about the cost of two coats of paint) has a lot to do with the remarkable consumer acceptance which has greeted his steel house. this finish gives the steel permanent rust resistance and eliminates a large part of the $20 a month maintenance reserve usually figured for a house this size. But its appeal to the eye may be even more provocative to the customer. The handsome colors, the subdued gleam of the mat finish, the look of immaculate cleanliness and imperishable newness - these seemed to stir something very close to the American heart. Moreover, Strandlund had reduced one big disadvantage of steel house construction - high thermal conductivity - by exploiting recently developed insulating materials such as glass fiber and rubber gaskets. And he had intelligently chosen to capitalize on, rather than fight with, the high conductivity of steel by introducing a low cost radiant heating system which distributes heat from an overhead plenum chamber through the steel ceiling panels.

For all of these reasons, Lustron houses were selling while comparably priced conventional houses stood vacant. Although Lustron dealers had stopped taking down payments during the months of plant delays and urged customers to take their money back until a firm delivery date could be set, at least half of them had refused to do so and over $200,000 worth of down payments was in escrow in one city alone.If the present house was not priced for the big low cost market, it seemed an attractivebuy to the stable middle-class market - the kind of buyers who, dealers reported, had been holding their own lots against a drop in building prices and who were able (although not required) to put cash down payments as high as 50 per cent into home purchase. Thus what looks like an initial handicap - Lustron's failure to hit a lower price market - may turn out to be a long-term advantage: Lustron seemed clearly to have surmounted the black-eye which prefabrication had got as emergency housing during the war and to have established its house with the public as a quality product. If Lustron can sell enough houses at its present price to stay in business, the way will be clear to bring out a stripped-down model for the lower price market.

A nice clean way to build a gas station

Last month as Lustron moved to meet its test in the market, big Carl Strandlund sat, cool as a cucumber, at his long desk under the photographs of an impressive list of friends of his house - including President Truman, Senator Flanders, and one-time housing boss Wilson Wyatt (who resigned in protest when the Lustron house failed to get the Chicago Dodge plant). Strandlund had ridden out so many near-disasters, so many rumors of bankruptcy, so many charges of government favoritism, that his initial crusading fervor for his house had shaken down to a quiet but rock-like confidence.



Acme Newspictures, Inc.

HOUSE is currently available in four exterior colors - blue, yellow, gray and light tan. Interior is a gray, with kitchen, bath and utility room in a soft yellow. It is shipped from the factory complete with radiant heating installation and oil burner, all plumbing fixtures, automatic washing machine and dishwasher, a large amount of built-in furniture. House frame is made up of steel channels, factory welded into studs, wall sections and trusses. Exterior and interior walls and roof are made of interlocking panels, finished with porcelain enamel.

Strandlund is an inventor-engineer who happens also to have the slugging kind of drive sometimes described as "promotion genius." His old friends, who watched him run the Oliver Farm Equipment Co. from a gross $20 to $120 million a year, who saw him show up in Washington in 1946 with enough engineering drawings and application forms on his house to fill four dollys, who watched him in Congressional committee rooms when he battled for a surplus war plant and an RFC loan and saw promised equity financing fade away at the last minute - these friends say Strandlund is a man who simply doesn't know a licking. Some of these old-time business associates have joined the Lustron firm; since they all are men of middle years who gave up top-bracket business careers and incomes three times their present salary, their presence is a tribute to the quality of both Strandlund and his product.

One outstanding fact about Strandlund is that he is completely new to housebuilding. The house that may bring sweeping changes to the industry started out to be a nice clean way to build a gas station. Before the war, Strandlund was vice-president and general manager of the Chicago Vitreous Enamel Co., which made money during the depression by putting a porcelain enamel finish on the steel washing machine. For many years porcelain enamel had been used as a veneer for hamburger stands, filling stations and store fronts. Strandlund, who thinks primarily in terms of metal-working, sold Standard Oil of Indiana on porcelain enamel as an integral part of an all-steel structure. But when Standard Oil was ready to start building these filling stations after the war, government building controls still banned all but essential housebuilding. The government asked Strandlund if he could make a house instead. In three months, he showed up with complete engineering drawings for the present model and got the promise of both government financial aid and a steel allocation. Chicago Vitreous - who later agreed to sell its rights in the process to Strandlund - started work on the prototype house built in Hindsdale, Ill. (FORUM, June '47, p. 105)

Sounds like free enterprise

When Strandlund applied for an RFC loan under the 1946 legislation authorizing government loans to get factory-built housing underway, he was told he'd have to get support from Congress. "I didn't know how to do it," he says. "I didn't even know the Congressman in my own district. I was packing up to leave when some vets' groups said, - 'wait a minute; we know some Senators and some Congressmen.' So they introduced me to Senator Flanders, one of the few engineers in the Senate. Flanders asked me to bring in all details, blueprints and plans, and he sat down and went over every detail. When he got through, he was for us. Then I met other members of the Banking Committee. Inside of a few days, I had the support of the committee. Then I met some Representatives. They said - 'You sound like free enterprise.'"

RFC approved a $15 1/2 million dollar loan to Lustron 15 minutes before its emergency lending powers expired on June 30, 1946. This authority was later extended by Congress, and Lustron got a second loan of $10 million in the summer of 1948 and a third loan of $7 million in february 1949, of which it has some millions yet to draw. The first loan was a seven-year convertible loan at 4 per cent, payable in installments (of which two have already been deferred). The other loans were short-term loans for working capital. Equity financing, amounting to $840,000, was raised by a common stock issue sold at $10 per share to some 20 customers by Hornblower & Weeks of Chicago.

"There has been a lot of talk about our equity financing," Strandlund says. "Well, production engineering is usually written off as zero in capitalization. But I brought in the patent and the engineering. I'm an endorser on all notes. If there is any failure in Lustron, you can meet Carl at the breadline."

Bolsters for weakness ahead

During the frenzied months when Lustron was looking for financing, Strandlund made some fundamental decisions. The first of these was to start big. Although he had some offers of private financing, they were not big enough to permit big production. Steel and steel-working machinery pays off only in volume production, and Strandlund insisted from the beginning that this volume point had to be set much higher than that considered feasible by others who have tried to launch a factory-built house. (That this volume point is very high is also indicated by the fact that, although prefab pioneer Foster Gunnison has had the backing of U.S. Steel since 1944, he still uses only 2 1/2 tons of steel in his wood panel house.

The second of these was not to produce a minimum house for the lowest third of the market. He decided to shoot for the middle third: a relatively stable group into which families from the lower third shift up in good times and families from the upper third move down in bad. Thus he loaded his house with storage walls and built-in furniture, put in an automatic dishwasher and washing machine, radiant heating and 1, 025 sq. ft. of floor space. Strandlund had hoped to do all this for a price to the customer of around $7,000. The general postwar price inflation boosted the price of his plant equipment about $5 million over estimate and the sales price of his house to about $9,000. "We have to have a house price to help us over the start and our inexperience," Strandlund says. "There have been too many inadequate starts, too much inadequate capitalization in the prefab feild. A lot of these people failed because they had no bolsters for weakness ahead."

His third decision was to use AFL labor in the plant, thus opening the way for an agreement on site erection with the AFL craft unions who in the early days of prefab ripped shop-made house apart. Long before he moved into his Columbus plant, Strandlund signed a master agreement with the international representatives of the carpenters, plumbers and electricians unions. This was the first national pact in which the unions agreed to limit the various craft jurisdictions over house construction to these three basic trades. In return, Strandlund agreed to employ union plumbers and electricians at regular rates to handle plant plumbing and wiring work and to recognize carpenters' jurisdiction over the rest of his plant workers. The unions' rediness to come to terms with Strandlund was accelerated by the promise of the factory-built house: year-round employment not only in the plant but on the building site. So far, the international agreements have stuck remarkably well at the local level, and not a single dealer has reported serious labor trouble.

The link between the Lustron plant and the Lustron dealer is a specially built tractor-trailer, into which the 12 1/2-ton house is loaded. Last month tractor-trailers were still driving through the plant under their own power, but by next month Lustron will move a continuous line of trailers on a conveyor belt through the loading area. Truck-tractors pick up the trailer as it comes off the line and drive it to the building site, where the trailer is unhooked to remain on the erection site. The tractor picks up an emptied trailer from a nearby job and comes back for another trip. Thus the trailer serves as a warehouse at the building site, and the house parts are packed to unload in the order of their use on the job. A rail freight rate of $1,668 now prohibits shipment to the West Coast, and Lustron is negotiating with the railroads for a commodity rate of $2.75 per 100 lbs. This would be comparable to the $640 cost of moving a carload of hot water heaters to the West Coast, or the $720 charge on a carload of the kind of sinks used in the Lustron house. Lustron argues that, if it broke its house down and shipped it in carloads of like parts, these rates would apply, and is petioning the railroads to permit shipping the house as a unit at the cost of shipping the parts seperately. Lustron also hopes not to box and crate the house parts, but to run its loaded trailer onto a flat car. At the rail unloading point, truck-tractors would pick up the trailer for transport to the building site.


Bob File

GIANT PRESSES form all parts of steel house. The 600-ton press shown here makes the basic 2 x 2 ft. panel, employing five dies. Lustron spent $2 million for dies.

One of the first points a critic of Lustron's distribution system can score is that so far not many of the big merchant housebuilders has been sold on the Lustron house. But it would be a superficial judgment to discount Lustron's chances simply on that basis. Lustron may not be able to beat the cost of the Levitts or Burns-Kaiser, who build thousands of houses a year on a single tract of land. (Strandlund would argue that he can beat them right now on quality per dollar.) But not everybody wants to live in a vast neighborhood of identical houses - and the big point of the Lustron house is that the customer can have his moderate-priced house where he wants it. Moreover, really big merchant builders still can be counted only in the dozens, and are found only in metropolitan areas where the market is large enough to support mass developments. Lustron promises to make the economies heretofore realized only in these mass developments available in smaller cities and rural areas where volume builders do not exist. Furthermore, the house is probably the most economic form of building for the some 30 million improved lots estimated to be standing vacant in U.S. cities.


LOADING AREA is where all conveyor lines converge. The 4,000 finished parts of house are loaded on trailer chassis, which are drawn through plant on their own conveyor.

AUTOMATIC WELDING MACHINERY of the size used in the automobile industry welds the various sub-assemblies of the house frame. House has 10 trusses, 20 wall sections.

RAW STEEL is unloaded from railroad cars running into this plant in the morning; by the end of the day it has moved out of the door on a trailer as finished parts of a house

PICKLING is the cleaning operation that prepares formed steel parts for enameling. After they come off presses, parts are dipped in the pickling solution in an open basket.



Bob File

PORCELAIN ENAMEL color coat is sprayed on by automatic machine, through which parts pass on flat conveyor. Then they are fired in 1,300 degree F. enameling furnace (r.).

When Lustron handed out its dealer franchises, it tapped well-financed men with building experience. Some were in existing building companies; others organized new firms for this purpose. A number of firms were organized by men whose background was primarily in heavy construction: The New York dealer, Svend Ericksen, is a prtner in the Gotham Construction Co.; Joseph Miele, who holds a franchise in New Jersey, is a bridge builder; Kuhne-Simmons had done considerable building for the University of Illinois.

A number of builder-dealers had formed partnerships with or found stockholders in a type of local business interest likely to be favorably affected by the Lustron house - a real estate broker, a ready-mixed concrete firm, a homebuilding contractor. If the Lustron house moved rapidly ahead, such integration was likely to take place on a widening scale - and bring an opportunity for cutting the price to the customer. For example, if the local Lustron dealer's operation reached an attractive volume, the master plumber might logically decide to move into the dealership and participate in profit-sharing at the top level rather than get his take in the usual form of a percentage on the sale of plumbing supplies.

One of the sales handicaps of a factory-built house is that it cannot advertise a fixed, national price - or even quote the same price to two customers in opposite sides of town. The cost of the house begins, of course, with the lot - but even if the cost of the land and land improvements could be seperated from the erected house price, a fixed price would not be possible. The essential fact about a house is that it has to be attached to the land, and this attachment opens the door to a host of variable cost factors. Thus, in Minneapolis, where the frost line is 48 in., the foundation for a Lustron house cost $400 more than it would in Miami. In Des Moines, where union plumbers work for $2.50 an hour, the Lustron house will be considerably cheaper than in the suburbs of Chicago, where union plumbers get considerably more an hour. Lustron has done its best to get around this lack of quotable price-to-customer by assuming a very firm price responsibility. Every dealer is obliged to get Lustron's approval of the price he charges. Lustron's okay is based on a detailed work sheet covering the man-hour cost of every part of the construction operation and the cost of any materials purchased locally; a square-foot quote enabling the builder to hide his profit is not permitted. The dealer's allowance for profit and overhead is also set by Lustron. Since this is somewhat less than the profit without overhead to which the conventional house builder is accustomed, most dealer's feel it is too low. Because their overhead on initial and experimental houses is apt to be enormous, their complaints about this Lustron-dictated maximum are currently very loud. On its part, Lustron says that the dealer's overhead and profit are figured on the basis of a volume business and that a dealer performing the minimum operation Lustron considers economic - a house a week - would net something over $30,000 a year. Lustron also points out that it provides the dealer with many special services, including national advertising and centralized purchasing, which should reduce its overhead below that of the conventional builder.

A new kind of dealer


Len Rosenberg



A. Mathewson

LUSTRON'S CONNECTICUT DEALER: Like most, he has more customers than construction money

Lustron's Connecticut dealer is C-B Homes, Inc., a firm organized about a year ago in New Haven with a capitalization of $160,000. President Stanley Crute is a civil engineer who for some years was in charge of all state building. With his brother, he operated a general contracting firm before the war. Then he served as state OPA director.

"After the war," Crute said, "I couldn't stand the price of lumber. I didn't think any kind of housebuilding involving the inflated price of lumber would be a sound operation. I decided to see what had happened in prefab. When I saw the Lustron prototype in Hindsdale, it looked to me like the first soundly engineered house in which it could be fairly said that machines had replaced men."

When Crute organized his Lustron dealership, Gregory Bardacke joined the firm as vice-president. Bardacke had been consultant to Wilson Wyatt on industrialized housing and had helped Carl Strandlund work out his labor deal. His name will be familiar to those who have followed the factory-built house, since he had also been vice-president of the Fuller Corp. which tried to bring out Buckminister Fuller's famed Dymaxion.

Over the winter, C-B Homes put in foundations and by last month they had erected and sold 17 houses at prices between $9,300 and $9,900, not counting land and land inmprovement. Their best figure on man-hours to date is 600, but they are confident that this will soon drop to 350. They currently have six erection crews at work, 12 houses under construction, and a backlog of 61 firm orders.

Sales are moving briskly, the partners say, and Lustron buyersw become their best salesmen. Satisfied customers include a White Tower chain executive, who liked the porcelain enamel steel finish of his hamburger stands, and the son of the leading banker. Crute would like to erect 30 houses a month, but, like many Lustron dealers, can't raise the construction money, which would amount to a continuous outlay of $180,000.

C-B Homes have already cleared 160 Connecticut towns on codes, after a stiff fight on basementless construction in some of them. One town, where the political boss also happens to be a lumber dealer, is still a holdout.

How Big is a Trading Area?

When it started out lining up well-funded dealers, Lustron handed out a number of exclusive franchises. The whole of the New York metropolitan area was tied up under a single dealership, as were the states of Connecticut, New Jersey, Florida, and large areas in MIchigan and Wisconsin. When it became apparent that more capital was required to launch a dealership on this scale than the dealers were willing to risk or able to raise, Lustron stopped issuing exclusive franchises and last month set about jarring loose some of those already issued. The dealers, on their part, fought had for holding on to as big a slice of territory as possible on the natural theory that plenty of room was their best market insurance. Opinion within Lustron was still not clearly formed on how many dealers would be needed or exactly what the size area which one dealer could economically serve.

The dealers, of course, are on the front-line of Lustron's attack on obsolete local building codes, punitive zoning ordinances, deed restrictions, and the varying requirements of FHA state offices. Lustron backs up the dealer with legal and other assistance, and its construction system is backed by a stamp of approval from FHA's technical division in Washington. FHA's loan valuations have averaged over 80 per cent, and there has been, therefore, no difficulty about mortgage money. But Lustron, like many another manufacturer who has distributed a building product on a national scale, would be more than charmed if FHA in Indiana would not insist on an overhead light in the bedroom when FHA in Ohio does not and has often wondered why FHA in Tennessee wants a door between the kitchen and dining room while FHA in other states approve Lustron's open plan.

Codes have been the toughest problem: the porcelain enamel steel wall keeps the house out of the city limits of Chicago, while copper plumbing is still banned by codes written during cast iron days in a number of places. There have already been, however, some victories. In St. Louis, where a number of Lustrons are already up, the Post-Dispatch wrote editorials blaming the city code for barring Lustron, and the code was amended. Strandlund appeared personally to testify for his product at the first deed restriction case in Detroit; the original property owner testified that had he known in 1909 that a porcelain enameled steel house would some day be available, he would not have forever restricted his property to a brick house. Lustron's radically new cunstruction system means that initial houses run headlong into out-of-date codes, but one of the great boons of the house as a standardized product is that the battle for code acceptance has to be fought only once in each area - the first approval opens the door to as many hoses as the dealer can build.

Labor hours at the site have, up to now, been the dealer's biggest headache. Hours on initial houses have run as high as 1,000 - as compared to the hoped for 350. Lustron's competitors are quick to say that there are simply too many pieces in the house - about 4,000 as compared to 30,000 in a conventional house. "Why, you could paper the walls with the blueprints they have to consult," one prefaber snorts. Since man-hours have dropped sharply where dealers have built enough houses to train a crew, it is unlikely that there is much pouring over blueprints after the first house or so. One dealer's report on his first four houses runs like this: 1.211 hours, 1,088 hours, 952 hours, 436 hours. In other cases hours have dropped much less because dealers were splitting crews - breaking the first experienced crew of five men into nuclei for two or three crews. Main difficulty in the house parts was in the cabinet work - about one-fifth of the house - which all dealers found very hard to put together. Considerable redesign and retooling has been done on this, and Lustron is now shipping pre-assembled cabinets.

Needed: construction money

If the dealer is to put up houses at the volume that will keep the Lustron plant operating and earn himself a sizeable profit, he is going to need much more construction money than the housebuilding business has seen before. Lustron asks for its money when the house goes out the plant gate. This means the dealer has to put out about $6,000 plus the cost of labor on each house. To sell five houses a week, a dealer would have to have 20 homes in process in any one month perios - the amount of cash involved would be over $120,000. Since few Lustron dealerships are capitalized for more than $100,000, this kind of money is not available on a regular bank line of credit.

Even with the aid of FHA commitments, construction loans, as every housebuilder knows, are apt to be dribbled out just in time to pay for each sack of cement or each hour of labor. And if its hard for the conventional builder to get enough construction money to start a volume operation, it has been twice as hard for anything resembling prefabrication. The postwar boom in prefab systems, when many a customer who bought directly from a prefab plant tried two or three contractors before he could get the house up, convinced a number of bankers that prefab is one of the worst risk in a generally unalluring lending area.

Because Lustron stands behind its product and because its speedy erection time provides a quick in-and-out, it is obviously a more attractive prospect for construction money. Lustron thinks it is attractive enough to interest some substantial private investors and is now negotiating with interest who may advance funds to set up a national pool of construction money. A nanational pool of construction money would free Lustron dealers from the purely local aspects of construction financing - from the sometimes arbitrary decisions of local lenders made in the interest of a balanced portfolio and on the basis of other competition for available funds. Such national financing would be safeguarded by a standard completion bond arranged by Lustron for all dealers.

Although Lustron has made no request, RFC was known to be concidering the possibility of making construction or interim loans to dealers as a safeguard for its original investment. It is believed that RFC has enough authority under its general powers to make loans to dealers similar to the "floor plan" financing which auto dealers get under the General Motors credit plan. Thus instead of waiting until he gets an order from a purchaser and then transmitting it to the factory, a Lustron dealer would receive a certain number of houses a month regardless of the firm sales agreements he has lined up. A car dealer gets this financing on the stock he has on hand. It might be three or four months before he sells a particular car. Then, when he sells it, a new type of financing is arranged for the purchaser, and the floor loan is paid off. While this type of financing would equip the dealer with a fluid credit unparalled in the housebuilding industry, it would also add another item to the sales cost of the house. Short-term dealer financing in the auto industry cost 6 per cent.

Automobile finance men, who have watched Lustron with interest, suggest that another possible source for this kind of money might be some of the smaller steel companies who, with markets currently dwindling, might decide to provide dealer financing at lower-than-market rates to get the Lustron house on the market.

The man-hour test

As Lustron faced the test of bringing its house to market, it seemed to qualify for success by one fundamental theory of mass production. It had made a tremendous reduction in the man hours required to produce a house. Direct plant labor per Lustron house amounts to 280 hours; the Quantico project showed that 350 man hours at the site is possible. This means 630 hours of direct labor per house as compared with an average, 1,600 man hours required by efficient site fabrication operations. On this basis, the saving in direct labor cost amounts to more than twice the cost of shipping the Lustron house to the farthest point in the present distribution area and to four times the cost of freight in the states where Lustron will find its major market. Nor do these rough figures tell the complete story of the man-hour reductions made by the Lustron operation. For the most part, Lustron man-hours start with rolled strip steel; the 1,600 site man-hour figure for conventional building does not include the man hours required to fabricate materials before they reach the building site. Elaborate computation might establish whether Lustron's man-hour savings minus freight would be high enough to amortize investment in plant and provide a profit: this basic theoretical question will soon be answered by the reality of how well Lustron competes with conventional building in local markets.

It is interesting - although not particularly enlightning - to apply another theoretical yardstick to the Lustron operations. This is the 1.6 ratio of sales per investment dollar characteristic of the automobile industry. Since Lustron's ratio of expected sales ($150 million) to invested dollars ($33 million) is about 4.5, this may mean that Lustron is inadequately capitalized. Or it may mean that Strandlund has launched an industry whose high rate of return will be deminished only by the appearance of competition.

Whatever these theoretical considerations point to, Standlund had several very practical aces yet to play. one of these was a break-even point of 35 houses a day. (This is the production of one eight-hour shift, but most economic use of the plant would be three-shift operation since the enameling furnaces must be kept at heat round-the-clock.) This break-even point means that if Strandlund can capture only slightly more than 1 per cent of the estimated annual housebuilding market he can stay in business long enough to find out how to make a profit. Strandlund himself points to his steel roof panels, which he thinks he could sell to repair every leaky roof in the U.S., and to his steel bathtub press which has already attracted the interest of a plumbing manufacturer who wants a competitive line of steel bathtubs and thinks it would be cheaper to buy from Strandlund than to install equipment.

Trade-in models?

A vigerous program of both cost-cutting and product development was underway. For example, Lustron especially resents the fact that foundations alone account for some 10 per cent of house cost and is researching the problem of how to cut this down. Although a stripped down model would undoubtedly get priority, architect Carl Koch had already designed a luxury model with garage for future production. Strandlund beleived he could someday bring out improved houses loaded with gadgets that would make Lustron owners want to trade in old models for new ones just as automobile buyers do. Second-hand Lustrons, he thought, might provide the first real answer for good housing for the lower-income group. (What trade-in models might do to existing methods of home finance and marketing was a prospect to set bankers' minds ajar.)

As the housebuilding industry calculated Lustron's chances and figured the effect a successful mass-produced house might have on every existing way of doing business, at least one thing was clear: Whatever the future for Lustron and however it would answer the question of the mass-produced house, housebuilders might well have cause to be grateful for its national, well-financed attack on many of the out-of-date practices which have kept the cost of a house too high.