Art Of The Deal: Who Drives Diesel?

ONE AFTERNOON IN THE EARLY 1980S, the sales staff and agents of Genius Group, a mishmash of trendy Italian clothing labels, were previewing the upcoming collections and discussing strategy. When talk turned to their second-string, $7 million jeans company Diesel, a production manager with a minority stake and an unfashionable mustache upbraided the others, "Guys, take this seriously because one day we're going to be bigger than Levi's."

"We all laughed and said, 'this guy is crazy,'" remembers former Genius president Adriano Goldschmied, who was running the meeting that day. "Diesel was a brand we had created to get rid of leftover fabrics and closeout stuff. We even chose an anti-movie-star name that said cheap, a slow car that smells bad."

In 1985 there were few objections when the upstart manager, Renzo Rosso, announced he wanted to swap out his group shares to become sole owner of Diesel. A modest farmer's son from outside Padua, Italy, with a textiles-trade-school diploma, Rosso, 50, is not your typical luxury-group CEO. Sure, he flies in private jets and frequents fashion shows, but most of the time he wears jeans or sweats, and his curly hairdo is more Peter Frampton than Bernard Arnault.

Yet at a moment when trendsetters complain that ultraformatted luxury brands like Dior, Chanel and Gucci are becoming too predictable, Diesel, with its quirky stores and advertising and its outsider chief, is suddenly at center stage, a success story few would have predicted.

Except Rosso, of course, who for 20 years has remained singlemindedly focused on the development of the brand and fanatically obsessed with the idea that casual clothing could be fashion's long-term winner. Since he bought out his partners, he has grown Diesel from $7 million to $1.4 billion last year, acquiring the small Belgian designer Martin Margiela in 2002 and signing up manufacturing and distribution agreements with the trendy Milan-based DSquared designers, Dean and Dan Katen. Rumors are rife that additional deals are in the works, specifically acquisitions.

"One way or the other, you must be successful," says Rosso, leaning across an outdoor table laid out with a country lunch. He has driven up the steep gravel road to the Diesel Farm, an estate acquired as a sort of company retreat in the Veneto countryside, with Stefano, 27, the second of his six children, who is completing a customized M.B.A.-style training course to be able some day to take over the company's management. Rosso's oldest son Andrea, 28, is creative director at the group's surf and street-wear line 55DSL. Rosso is wearing his usual chief-executive attire: jeans, T shirt, Margiela sneakers. His favorite jeans are ones that have been dyed with indigo and dipped up to 16 times to achieve a dark blue color.

"If you don't succeed"—and here his teased-out mass of curls bobs in rhythm as he taps his fingers (two of them tattooed with his initials RR) emphatically, rattling the wine glasses—"it's the product, or it's the managing, or it's the costs, but there must be a reason. I have to succeed. I am a Virgo, and I need perfection."