Key size was reduced to 56 bits because IBM wanted to fit LUCIFER on a single chip. LUCIFER then became DES.
Because of the promising results
produced by the LUCIFER project, IBM embarked on an effort to develop
a marketable commercial encryption product that ideally could be
implemented on a single chip. The effort was headed by Walter Tuchman
and Carl Meyer,and it involved not only IBM researchers but also
outside consultants and technical advice from the National Security
Agency (NSA). The outcome of this effort was a refined version of
LUCIFER that was more resistant to cryptanalysis but that had a
reduced key size of 56 bits, in order to fit on a single chip.
Stallings, W. Cryptography and network security, 5th ed.. p.78