This is an article that ran in COLLIER'S Magazine, November 5, 1949...

Interior of the Lustron factory at Columbus, Ohio, showing part of the conveyer system and paint booths in the enameling department.

By ARTHUR BARTLETT

Dreams don't begin. They happen. There you are, suddenly in the midst of one. That's how it has been with Carl Strandlund had his pastel-tinted enamel and steel house.

Mr. Strandlund wasn't even thinking of a house when he went to Washington, D.C., in the Summer of 1946. He was looking for steel with which to build some filling stations. He intended to take the steel back home to Chicago and spray it with porcelain enamel and bake it bright and shiny. But the effects of the war were still being felt, steel was scarce, and the Civilian Production Administration said the new filling stations were out of the question.

Mr. Strandlund was not in a position to pull political strings. He wasn't a politician; he was an engineer. He didn't even know the name of the boss of his own ward in Chicago. So when the people in Washington said "no" to his filling stations, he was ready to give up.

But at that magical moment Mr. Strandlund began taking part in wonderous things which happen only in the very best dreams.

A man he didn't know, whose name he cannot remember, if indeed he ever heard it, said to him:

"If this enamel stuff you've got can turn steel into filling stations, couldn't you make a house with it, too?"

Whereupon the man faded back into the misty nothing from which he had come.

A house? Mr. Strandlund thought that over. Everyone was looking for a house. And then an idea came to him. There would be pastel-tinted porcelain enamel houses sprouting all over the country. He would stamp them out of steel, like so many automobiles. Hundreds of houses a day. Thousands of houses a month. It would be more than prefabrication, it would be all-out mass production, "industrialized housing." Homeless G.I.s would have beautiful, modern houses in a hurry, at a price they could afford to pay. Mr. Strandlund could see the housing shortage melting away like a pile of snow under a blazing sun.

The more he thought about it, the more Mr. Strandlund felt that such an unprecedented housing project was a natural for him. He had educated himself as an engineer through correspondence school. He was a self-made industrialist, like his fellow Scandinavian, William S. Knudsen, of General Motors. He had put the tractor on rubber wheels, developed a lightweight combine, played a part in the developement of air conditioning. As vice-president and general manager of the Chicago Vitreous Enamel Product Company - at $100,000 a year - he had worked out a new process to make armor plate for tanks, cutting down processing time from 14 hours to eight seconds.

Mr. Strandlund was then in his late forties, a stocky figure, with pale-blue eyes, thinning blond hair and a neat little mustache. He wore his expensive clothes in the right degree of rumple, spoke in a rough and genial way, and conducted himself generally with the forthright, positive manner of an engineer with a reputation for being "a guy who can design for production." An enthusiastic sportsman, with a racing stable of his own, he carried an air of easy opulence. When in Washington, he lived in a fine suite at the Mayflower Hotel.

The idea of porcelain enamel houses was not entirely new. It had been discussed before the war by the Hogenson brothers, who owned the Chicago Vitreous Enamel Product Company. Chicago Vit's principal product always had been the sand-like material called frit, the basic ingrediant of porcelain enamel. Anything to increase the sale of frit was obviously good busines for the Hogensons, and they had set up a subsidiary to manufacture porcelain enamel panels for store fronts, filling stations and similar structures. This subsidiary, the Porcelain Products Company, was stopped dead by the war, and it was in an effort to revive it that Mr. Strandlund had gone to Washington.

Where was the logical place in Washington for a stranger to go when he wanted to talk about a house?

To the National Housing Agency, of course. Mr. Strandlund went there and was received most cordially.

Carl Strandlund of Lustron testified his company lost $1,000,000 a month

Selling Uncle Sam the Idea

The welcome mat was out at N.H.A. for anybody who thought he could build houses of anything. And Mr. Strandlund, as he warmed up to the idea, talked not only of building houses but of turning them out in scads. The venture, as it shaped up in his mind, would require "100 per cent government financing, as a thing that would contribute to the welfare of the country."

Why not? Congress was so concerned about the housing shortage that it had already authorized a government-guaranteed market for prefabricated houses completed before the end of 1947. A number of manufacturers were already building prefabs, or getting ready to build them, under this guarantee. to Mr. Strandlund, it was a ready-made chance. All he had to do was satisfy N.H.A. that he could make satisfactory houses at an agreed fair price, and N.H.A. would arrange to pay for an agreed number of all those manufactured and unsold before the end of 1947. The agreed number, it was made quite clear, would be a whopping big figure.

Now Mr. Strandlund had never built a house of porcelain enamel - or of anything else. So he went back to Chicago to see how it might be done. He laid the whole plan before his employers, the Hogensons. They agreed to go along. They revived the dormant Porcelain Products Company with an injection of $36,000. They did this, as Mr. Strandlund later on told a Congressional committee, "to do the thing, and not get it mixed up with the operations of Chicago Vit."

Mr. Strandlund then set about building the prototype of his dream house pretty much by hand. As he went along, he built up stacks of engineering data to show how it could be done by mass production, given the proper plant and machinery.

Finished in the fall, the pilot house was set up on a lot in Hindale, Illinois, a Chicago suburb. It was something new in houses, all right. Virtually all steel, with a tinted porcelain enamel finish inside and out, built on a concrete slab topped with asphalt tile, it had no basement, and was heated from the ceiling.

It wwas compact and well arranged. Most people that saw it agreed it was a lovely house.

Engineers at first raised a number of technical problems. But, after all, perfection was not to be expected on the first try. And Mr. Strandlund declared he could mass-produce this house - living room, dining room, two bedrooms, kitchen and bathroom - at an F.O.B. factory price of $4,341.47. He said he could put it up anywhere in the country, ready to move in, for approximately $6,500.

It would take selling and promotion, naturally; and to that end, the name of the Porcelain Enamel Products Company was changed to the Lustron Corporation. This would be the Lustron house. And as the years passed, Strandlund predicted, new-model Lustron houses would come out like new automobile designs, each more glamorous than the ones before.

Back in Washington with all his blueprints, drawings, flow charts, cost figures and estimated production schedules, Mr. Strandlund went to the top man in housing, National Housing Expediter Wilson Wyatt. A hard-driving young executive who was out to lick the housing shortage come hell or high water, Wyatt listened to Strandlund, looked at his data, and was impressed. He went out to Hinsdale, went over the pilot house, and was more impressed.

"How big can you go?" he asked.

the answer was gratifying. Strandlund was thinking then of starting with 85 huses a day in July, 1947, and reaching 450 a day in December of that year. This would add up to 28,610 houses before the end of 1947. So Strandlund asked for a market guarantee, in round figures, for 30,000 houses.

N.H.A. was not willing to go quite that far. Taking into account "the organization has held in the field of domestic real estate on this scale and the novelty of exterior and interior vitreous enamel finish in this market," it offered to guarantee 14,500 houses - or $54,843,024 worth according to the Reconstruction Finance Corporation, which was to put up the money.

Lustron officials claim that bottlenecks in mass-producing the home are just about eliminated. But the problem of distributing the prefabricated units still remains

A Guarantee with a Catch

The market guarantee was all very well, but it provided no cash until the houses actually had been built, and then only if they couldn't be sold.And private sources, Mr. Strandlund had discovered, were not interest in putting up the money to try to manufacture them. To make his houses, he figured he needed $52,000,000.

"I told Strandlund that such an operation was immense, even by our large-scale thinking..." one of Wyatt's subordinates noted in an office memo in September, 1946. Nevertheless, Wyatt recommended that RFC make the loan.

RFC, to Wyatt's expressed "great surprise and disappointment," declined to oblige. Charles B. Henderson, then chairman of the big government bank, pointed out that the Lustron Corporation showed on its books a total cash investment of $36,000, or 7/100ths of one per cent of the amount it wanted to borrow. If it should prove unsuccessful in its attempt to manufacture houses, he therefore reasoned, substantially all the loss would fall on the government. If, on the other hand, the venture was successful and its earnings came up to the firm's own estimates, Lustron would receive a return of 14,000 per cent on its $36,000 investment.

Wyatt disagreed. Accepting Standlund's valuation of "patents and privileges" at $5,000,000, and adding the cost (to Chicago Vit, though it didn't show in the Lustron books) of development of tools and dies, he arrived at $5,700,000 as the company's real investment. But regardless of that, he declared, "We do not feel that the failure of any company to meet any particular ratio of equity capital should be the basis for declining a loan application for a sound house or a new-type material that is needed as part of the Veteran's Emergency Housing Program..."

If the RFC persisted in being balky, Wyatt threatened, he would issue a directive requiring that the loan be made: a power he claimed under the Emergency Housing Act. Up on Capital Hill, in a much-publicized hearing before a Congressional committee, he stormed at the RFC for "banking-as-usual" during the housing emergency, and argued the Lustron case at length with RFC Director George E. Allen, a close friend of the President. Here was a house, declared Wyatt, "the like of which this country has not seen before," and it could be mass-produced and sold for "approximately $6,500."

It was, he said further, "one of the sensationally good products that the government could be very proud of having a hand in helping to develop." And he was sure the risk to the government would be "very small." He saw, "every reasonable probability" that the loan would be repaid, and, "what is more important, it is awfully good business for this country because it will get houses."

"We feel it is an emergency," he concluded; "we feel the time should be telescoped. We feel the houses should be obtained this year and next year, and not in 1952 or 1960."

Allen, a man famed for his air of placid good nature, was all sweet reasonableness. The RFC would be glad to engage the engineering firm of Stone & Webster on a consulting basis to look into the project. But even if the engineers should report favorably, he confessed, he didn't see how they could "tell us that, with a $36,000 investment, we should put up $52,000,000."

It was shortly after this that Wyatt resigned in protest against the delay.

Willing to Take Smaller Loan

Mr. Strandlund went back to RFC with a modified proposal. Insted of $52,000,000, he suggested he might make do with $16,000,000. This would mean a smaller operation, of course, but Mr. Strandlund declared he could still produce 30,000 houses a year. From his suite in the Mayflower, he issued a press release.

"We are not seeking subsidy," he declared, "but a loan to be repaid with intrest, resulting in a profit to the taxpayer."

At this point, Mr. Strandlund withdrew his earlier objection to having Stone & Webster make a survey. As those engineers went to work, it was hardly a secret around RFC that an unfavorable report - and hence and end to the whole matter - was generally anticipated. But Stone & Weber okayed the program.

Consequently, in January, 1947, RFC announced that it would lend Lustron $12,500,000 provided the additional $3,500,000 that Mr. Strandlund said he needed was raised privately, and provided the loan was guaranteed by Chicago Vit and by the two Hogensons and Mr. Strandlund personally.

Mr. Strandlund agreed to this, and back in Chicago, enlisted the brokerage house of Hornblower & Weeks to help him raise the $3,500,000.

"By the third quarter of 1947," he confidently told a group of housing officials in March, "Lustron will be shipping 100 houses a day, 2,500 a month, 30,000 a year."

But the $3,500,000 wouldn't come to light. Private investors didn't want to take the risk.

So Mr. Strandlund went back to Washington. He was confident, he told the RFC, that he could raise half a million. How about making the loan $15,500,000 instead of $12,500,000?

In other words, instead of a 75 per cent participation loan, how about one of 97 per cent?

Except for a few deals involving highly critical materials during the war, RFC had never in its existence granted any such loan and the only circumstances under whgich they would even consider it, the directors advised Mr. Strandlund, would be unmistakable evidence that both the White House and Congress wanted it to.

Mr. Strandlund got an appointment with no less a down-to-earth senator than Flanders of Vermont, a Republican, an engineer, an ex-banker, and a yankee to boot. The senator, if he didn't figuratively toss his hat in the air about this great chance to beat the housing shortage, was sufficiently convinced of its possibilities to sponsor Mr. Strandlund before a joint gathering of Senate and House banking committee members. Telephone calls to the RFC soon thereafter indicated that the more influential members of this watchdog group would look with favor of the Lustron loan. At the White House, Mr. Strandlund went to see an aide of Dr. John Steelman, Presidential assistant who had taken over Wyatt's responsibilities. Presently a letter arrived at the RFC on White House stationery, signed by Steelman.

"...I am greatly impressed by the fact that, according to expert advice, production by Lustron would make a real contribution toward meeting the housing deficit during the next two years..." he wrote. "I have discussed this matter with the President and he has authorized me to state that the views expressed herein meet with his approval. I believe, therefore, under all the circumstances, that this loan shall be made."

On June 30, 1947, the date borne by that letter - and the last day, significantly, on which such an extraordinary loan could be made under the powers of the Veterans Emergency Housing Act - the loan was officially authorized.

One of the remarkable things about the loan agreement was that the Hopgensons were no longer required to guarantee it personally, though Mr. Strandlund was; and the Chicago Vit guarantee was limited to the amount of profits the company might make by selling frit to Lustron.

Words of High Praise

In the earlier phases of negotiations, Mr. Strandlund had laid great stress on the fact that Chicago Vit was behind Lustron, supporting it with prestige and know-how. Wyatt had argued to a Congressional committee: "They are experts in the business, they are industrialist with a solid background, they are people of good credit..."

Under the actual loan agreement, Lustron no longer had this support legally. But the dream had become too firmly planted to be uprooted.

Mr. Strandlund, shuttling between Chicago and Washington, soon had a new basis for his operation. He was simply to resign from Chicago Vit and take Lustron with him. The Hogensons were to get $340,000 for the equipment Chicago Vit had developed for Lustron, and were to cede the patent rights - except those pertaining to filling stations and commercial buildings. Chicago Vit was to supply Lustron with at least half of its frit.

Now Mr. Strandlund had to scurry around and raise $840,000: the $500,000 specified as equity in the loan agreement, plus $340,000 to pay off the Hogensons. He raised it.

For their $840,000, the investors got 84,000 shares of Class A stock in the Lustron Corporation. Mr. Strandlund and his wife put in $500 each and received a total of 86,000 shares of Class B stock. Class A stockholders get paid off first in case of liquidation, but otherwise Class B stock is just as good.

So Much for So Little

So, Mr. Strandlund, for his $1,000, got voting control of the company. "I contributed the knowledge of the development," he explained. "I contributed quite a bit of the engineering. I put the thing together."

Anyway, Lustron was all set to goagain - except for one detail. The RFC loan had been authorized not to the new Lustron Corporation, but to the old Lustron Corporation. And the authority under which it had been grantedhad expired that same day. But RFC was now swept up by the dream, too. It amended the agreement to fit.

Lustron needed a plant in which to make porcelain enamel panels. The War assets Administration had numerous surplus defense plants on its hands, and Wyatt had been authorized to require WAA to reserve for companies concerned with housing any propertyalready not disposed of. Mr. Strandlund unhesitatingly asked for the biggest of them all - the vast Dodge-Chrysler plant in Chicago. Built by the government at a cost of $70,000,000 for the manufacture of airplane engines during the war, this factory covered nearly 6,500,000 square feet. But WAA had already promised it to another man with big ideas, Preston Tucker (for an account of those adventures see Collier's for June 25, 1949). Mr. Strandlund's second choice was the Curtiss-Wright wartime plant in Columbus, Ohio. A comedown compared to the Dodge plant, it was still huge: about a million and a quarter square feet, or, as Mr. Strandlund interpreted this to a congressman who had trouble visualizing it, about eight by ten city blocks.

There, at last, on November 1, 1947, Lustron was in business.

The year ended, terminating the contract under which the N.H.A. had guaranteed to pay for 14,500 of Mr. Strandlund's houses, and not a single house had been manufactured for sale.

Mr. Strandlund, however, remained optimistic. In January, 1948, he told a Congressional comittee, "We anticipate the production of 1,000 houses in June." After that, production would rise steadily, he said, "to closer to 4,000." Altogether, he said, he expected to turn out 17,000 houses in 1948.

This figure was quite a bit smaller that the 120,000 houses Mr. Strandlund had originally predicted for 1948. Nevertheless, it was 17,000 more than had yet appeared.

On August 31, 1948, the first piece of enamelware came out of the oven of the Lustron plant. Mr. Strandlund celebrated by converting it into souvenir ash trays decorated with his signature.

Not until mid-August, 1949, did Mr. Strandlund's dream factory make a completely mass-produced house of the type his dream specified.

Quite a Boost in Price

Since his great idea first caught him up, the housing shortage in the United States has been reduced by some 2,500,000 houses and apartments. But Mr. Strandlund has accounted for less than 3,000 of them. And instead of the price of $6,500 which he had originally estimated, most of them have sold for approximately $10,5000, not counting the cost of the building lot and other extras.

The vast plant in Columbus is an awe-inspiring sight. Massive, monster-like machines biting and twisting steel; fiery furnaces fusing the enamel to the metal seemingly endless overhead conveyer hauling the units from one section to another; hundreds of mammoth truck trailers waiting to haul away the 3,300 parts that make a Lustron house. Yet it is a big day even now when 30 houses leave the plant.

"There is nothing particularly wrong with the thing except the timetable," Mr. Strandlund assured a Congressional committee early last August. "We are right on the eve."

When I went to see him in late September, Mr. Strandlund told me that all the "bugs" were at last ironed out of the production line. Bigger nozzels on the enamel sprays would make it possible, he said, to turn out between 100 and 200 houses a day.

But now there is a new complication. There is no point in turning out houses at that rate if no one will put them up. And dealers are balking at Mr. Strandlund's requirement that they pay cash at the factory door and take all the risk of transporting the houses and buying the lots on which to build.

The way out? Mr. Strandlund hopes that Congress will pass a bill to guarantee the dealer's risk.

The house already has passed a $75,000,000 proposition to do just that, and, in early October, the Senate was considering whether to cut this down to $25,000,000.

And neither of those sums will do any good unless the RFC grants Mr. Strandlund another loan of $12,500,000 to keep the housing factory going.

He is fully confident that the money will come through. He has every reason to be cheerful. For his idea and $1,000 in cash, he thus far has obtained $840,000 from other private investors, government-owned machinery worth $14,500,000, and RFC loans totaling $37,500,000 - all to finance a project which is losing about $1,000,000 a month.

It has been a truly wonderful dream.

THE END