With Family Like This...

The story of the Gucci family is as fascinating, and as complicated, as the saga of the Gucci brand. The company was founded by Guccio Gucci in 1921. As a young man he worked at London's Savoy Hotel, where he developed a passion for beautiful luggage. Returning to Florence, he opened a store and a workshop to supply it with leather goods. But it was his son Aldo who turned Gucci into a global icon. Against his father's instincts, Aldo pushed for stores outside Florence, opening the second shop in Rome. The city in the 1950s was known as Hollywood on the Tiber for the number of movies made there and for the La Dolce Vita lifestyle. Gucci was a huge hit with celebrities like Italy's Sophia Loren and America's Bette Davis. Encouraged by the devotion of the U.S. customers, Aldo Gucci wanted to open a store in New York. His father was firmly against it. Aldo persisted, Guccio relented.

Before long, it was time for the third generation to take a role. That's where the trouble began. Aldo's son Paolo had his own plans for the business. He wanted to start a line of less-expensive products for younger customers and to open a second chain of stores. His ideas were quickly rejected, and tensions in the family grew. Eventually, he tried to start his own line — PG, for Paolo Gucci. When his father found out, he fired Paolo and notified all Gucci suppliers that if they worked for Paolo they'd no longer work for Gucci. The battle escalated — father and son suing each other — until Paolo did the unthinkable. Just as Aldo was on the brink of becoming an American, a lifelong dream, Paolo told authorities that his father had been evading taxes. Aldo Gucci was found guilty and, at age 81, went to prison. (Paolo was jailed briefly for failing to pay alimony in 1994.)

Paolo's cousin Maurizio had inherited 50% of the company and was becoming frustrated with the antics of his family. He set up a plan to take control of all of Gucci. He got the financial group Investcorp to buy out his cousins. Paolo was the first to sell. After that, the others quickly fell. With control of the company, Maurizio set out to restore the now diluted Gucci image. Domenico De Sole, who was then working as Maurizio's lawyer, was put in charge of Gucci America, and Bergdorf Goodman ceo Dawn Mello became Gucci's creative director. Tom Ford was hired as a junior designer. Despite the good hires, Maurizio proved remarkably incapable of managing the company. "Tom and I always said that we could never tell anyone what was going on because no one would believe us," says De Sole. "It was crazy." What was going on was that Maurizio was utterly incapable of controlling his spending. At a time when the company was losing millions, he put $12 million into refurbishing the Florence headquarters. Between 1991 and 1993, Gucci lost an estimated $102 million.

Investcorp had finally had enough. It forced Maurizio to sell his shares to them and asked De Sole to come to Florence to run the company. "It was the most exciting time of my life," De Sole says of his first months in charge. "Tom and I, we did everything. There was no one else left." As for Maurizio, he was murdered by his wife in 1995. In 1994, Gucci was in such bad shape financially that one Gucci executive couldn't get a $200-a-month lease on a car. That summer De Sole visited all of Gucci's suppliers to persuade them that the company was back on track. He also won over Italy's notoriously tough unions with the industry's first incentive-based bonuses. The problems at headquarters were harder to solve. "Everyone was paralyzed," said De Sole. "All they would do was write memos complaining about each other." Gucci was a "dispirited, incompetent organization," Coopers & Lybrand said in a report to Investcorp. "Everyone thought we were deadbeats because we were still there," said De Sole. No one thinks so now.