Dateline: Modena, Italy, The profit in firm family values

The sleek steel-blue LGV (laser-guided-vehicle), a sort of R2- D2 without the flashing lights, purrs quietly as it lifts up the pallet of components, pirouettes slowly and moves across the storehouse to deposit them. It is programmed to follow the daily rhythms of the factory. At the end of the working day, it shuffles over to "bed"; a power point in the wall that recharges its batteries overnight.

The scene is not from a futuristic movie nor from a state of the art complex in Japan or Korea. We are in the factory of one of the countless mediumsized family firms that are the backbone of Italy's economy, Rossi Motoriduttori, based near Modena, world leaders in gear reducers and variators. Chances are if you took an escalator or opened an automatic gate recently, their products made it possible.

"Certainly this is the way things are going," said managing director Greco Vero. "Fewer people on the shop floor, using machines when they are suitable and keeping human beings for more skilled work."

Modena's leap from post-war poverty to prosperity has been remarkable. The area has the sixth highest pro capita income in the country and its industry totals more than 2 percent of Italy's annual exports. Expensive new cars and full restaurants are the tip of an iceberg of economic well-being. Modenese businessmen have a reputation for flair, adaptability and thinking ahead.

Not surprisingly, with the approach of the scary new millennium with the ghoul of globalisation, Modena's family-run firms are having a strategy rethink.

"We're well established here in Europe but to penetrate in the rest of the world we may have to forge alliances with, for example, an American company," said Vero. Another development which Italian companies have tended to resist, could be a stock market float.

Most people associate the Modena area as the biggest producer of Parmesan cheese, or for its famed tortellini or balsamic vinegar or Ferrari. Yet economists from Harvard to Heidelburg study it for its unique economic model.

"All this area was agricultural plains after the war," said Claudio Lucchese, indicating the panorama of chimneys, factories and roads that makes up Sassuolo, Italy's "Ceramic Valley". "We were poor but the hills nearby were rich in clay so we started with ceramics." Lucchese's father started with a couple of machines trying to mass-produce tiles. Today their company Florim has covered the corridors leading to the Sistine Chapel and the swimming pools at the Atlanta Olympics. The company is still firmly in the hands of the Lucchese family; the founder's grandchildren are now in key management roles and profits have been poured back into the firm.

As tile makers prospered, suppliers and subcontractors who served their needs sprang up - glaze-makers, manufacturers of cutting machines, creators of firing ovens. "If we need a machine fixed it's just down the road," said Lucchese. "But the reasons the industrial districts work is that while there is healthy competition within the sector we know the value of interdependence. This stands us in good stead against Spain which is making inroads into our market."

Lucchese's ceramic production machines are created by another Modenese self-made millionaire, Franco Stefani, whose obsessive pursuit of innovation has earned him the nickname Archimedes. A short, lively man with spiky white hair, he began by creating machines for the ceramics industry and has taken that to the limit. "Look and touch," he says proudly, indicating two apparently identical pieces of green flecked marble. "Which one's the fake?" Only by turning them upside down can you tell.

His company, System,still 100 per cent family-owned, has branched into automation and logistics. "The only way to keep ahead is to constantly think about making processes better," says Stefani, who has a vertical storage system that provides 200 metres of space in just four square metres. "We generate our own resources. We set up technical schools or faculties at the local university to train specialised staff. If we waited for the government we would be out of business."

In the food sector, there are fewer family firms and more large industrial groups. Now, one of Modena's gastronomic specialties, fresh tortellini, are to be marketed abroad. "We have signed a deal with ASDA and are negotiating with Tesco to produce for them," said Bruno Venturelli, head of fresh pasta at the Fini plant. "We have been hesitant to export because a product with a limited shelf life needs excellent transport and distribution, but its going to be fundamental in the future."

Ravarino, to the north of Modena, seems an unlikely spot for a company at the cutting edge of Italian street wear, most of which is snapped up by Brits, Japanese and Californians. It was here, among pear and walnut trees, that thirty-something Carlo Rivetti and his sister, whose family own a large textile manufacturer, left the fold to take over two struggling brands, C.P. Company and Stone Island.

Rivetti's company produce fabrics that protect against electromagnetic waves, windbreakers that change colour with the heat, metropolitan jackets with anti-smog masks incorporated and clothes that are tear- resistant.

"Ours is a niche market," said Carlo, a thin sandy-haired man with a quirky smile. "We produce only about a million items a year. We can't and don't want to compete with the big names or the mass producers. We're betting on quality and experimentation. We also count on a personal touch. If an item is not moving in the boutique, the owner can bring it back and change it. If I'm abroad and I see someone wearing a C.P garment I go up and introduce myself, and offer to buy them a drink."