Business View: France's fashionistas will flounder if Gucci's gurus go their own way

If you phone the Milan headquarters of Gucci at this time of year, you will be played a charming message that tells you the office is closed for three weeks in Au-gust. This appears to be a pretty relaxed way to run a €9bn (£6.4bn) fashion empire, but it seems to work for its architects, Domenico De Sole and Tom Ford.

But while the fashionistas of Gucci are enjoying themselves in Europe's trendiest resorts, Messrs De Sole and Ford have been locked in meeting rooms with Serge Weinberg and other senior executives from Pinault-Printemps-Redoute, which has just increased its holding in Gucci to more than 65 per cent. PPR intends to raise that stake to 70 per cent by the end of this year and to 100 per cent in 2004. Many in the luxury goods industry believe PPR is paying far too much for Gucci and that, if the French group has any hope of justifying the price it has paid, it needs to retain the duo who turned Gucci from a basket case into an international "must have".

But the Americanised Italian De Sole and the Italianised American Ford are playing hardball with their new French masters. Speculation about whether they will stay at Gucci has galvanised the fashion industry for the best part of a year. The duo were grateful to François Pinault for rescuing Gucci from the aggressive clutches of LVMH, the luxury goods empire run by Mr Pinault's arch enemy, Bernard Arnault. But that was nearly five years ago and now the reality of the deal they struck with Pinault back in 1999 is beginning to sink in.

Mr De Sole and Mr Ford like to run their own ship. Mr Pinault and his hands-on lieutenant Mr Weinberg like to make sure their assets sweat. It was always going to be difficult to square this particular circle, particularly since Mr De Sole and Mr Ford have made so much money during their reign at Gucci that they need never work again.

So, in the sweltering heat of this most sticky of European summers, the two sides have been trying to strike a deal that will give Mr De Sole and Mr Ford the autonomy they desire within the PPR empire, while giving PPR the reassurance it needs that its investment is not out of control. In the past, Mr Weinberg has strongly hinted that it would not be such a loss if the Gucci stars left, but he is bluffing. PPR needs them to stay.

It needs them to stay because it is up to its neck in debt, and if its bankers feel Gucci's value has been impaired, they could put the squeeze on PPR. The group has already sold its builder's merchants business to appease the money men, and the rumour is that it may now have to sell Christie's, the auction house that it bought for £750m in 1999. What with the art market scandals, tighter financial strictures and a fall in the price paid for prestige assets, the auctioneer would almost certainly have to be knocked down for substantially less.

The word last week was that Mr De Sole had stormed out of the negotiations. This was strenuously denied. But any twist and turn in these talks will bring sweat to the brow of one of France's leading businessmen even more quickly than the 100F temperatures in Paris.

All talks and no action

There's less than a month to go to the World Trade Organisation meeting in Cancun (a resort best described as Mexico's answer to Torremolinos), and the developed world is getting its retaliation in early. Last week the US, EU and Canada announced not only a plan for cutting industrial tariffs but a deal to reduce farm subsidies. This would appear to be a case of hurrahs all round. However, while the tariffs proposal is interesting, the farm deal is pretty limp. War on Want described it as "like expecting a PlayStation 2 for Christmas but getting a Fame Academy CD".

And to add insult to injury, the US last week played down the importance of Cancun, describing it as a "major stock-taking of negotiations". In other words, "don't expect any agreements or progress, folks", just an update.

The Yanks may simply be managing down expectations, but you feel they are preparing the ground for years more of deadlock, which can only be glum news for the developing world.

j.nisse@independent.co.uk