Putting On Heirs

CHRIS SISARICH/IDC FOR TIME
Ernesto Bertarelli, 37, leads Serono, the Geneva-based drug company once run by his late father Fabio

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The Agnelli family long ago moved to diversify its wealth into stakes in such companies as Club Med and Danone, the world's biggest yogurt manufacturer. Whether or not Umberto succeeds in rescuing Fiat, the Agnellis face a vexing succession issue: there is no heir in the next generation. Giovanni's only son Edoardo killed himself two years ago, and Umberto's son Giovanni Alberto, who was being groomed as the successor, died of cancer in 1997. The burden of securing the family's financial future will probably fall to Giovanni's U.S.-born grandson John Elkann, who is just 26. Giovanni installed Elkann on Fiat's board in 1997, when he was only 21.

Benetton
EDIZIONE HOLDING

It built its wealth on the colorful knitwear of the retail chain bearing its name, but this PONZANO, ITALY, family is now widely diversified in catering, sporting goods and toll roads

Annual Sales: $7.7 billion

The tale of the four Benetton siblings Luciano, Giuliana, Gilberto and Carlo who launched their clothing empire by knitting sweaters at the kitchen table at night, has become legendary in Italy; they currently rank among Europe's wealthiest families. Color was the key to their success. Luciano, 67, the eldest, has said he couldn't bear to see young women in the 1960s dressing like their mothers and young men still decked out in gray. The bright, cheerful knitwear they produced was a hit in Italy, and soon they were exporting around the world, their products increasingly accompanied by provocative ad campaigns.

Today, however, the Benettons no longer view their $2.3 billion creation as a family company. They continue to hold a majority stake, but since taking the firm public in 1986, they have relied more on outside managers and this month announced that the family is withdrawing from management completely. Meanwhile, the family fortune has undergone a massive diversification. Through Edizione Holding, a family-owned company, the Benettons have bought stakes in operations as diverse as Formula One racing, Prince tennis racquets and a firm that refurbishes railway stations. Just last month they paid $7 billion to acquire a majority stake in Autostrade, the company that runs Italy's toll roads. (They already own the firm that runs the roadside restaurants.) Not all of their investments have been profitable: they lost an estimated $400 million on a mobile-telephone firm that collapsed.

The Benettons who founded the family business have 14 children among them, and the succession is already settled: the four siblings have set up a structure dividing all their assets into four parts. While there is no guarantee that their children will work together as well as they did, the clear division means no single member of the next generation will be able to dismantle the empire.

Otto
OTTO GMBH & CO.

The Ottos' mammoth catalog and Internet retailing operation traces its lineage back to a postwar shoe factory in HAMBURG. Today the family also owns the majority of furniture seller Crate & Barrel

Annual Sales: $25 billion

At the end of World War II, Werner Otto fled with his family to Hamburg from their Soviet-occupied home in what is now Poland. He won a license from the British authorities occupying the town to start a shoe factory, and in 1949 he founded a mail-order firm that is now the core of the family fortune. His son Michael was 28 when he joined the firm in 1971, and he became chairman a decade later. At the time, Otto Versand was a thriving German business with sales of about $2.5 billion. Today, recently renamed Otto GmbH & Co., it's a worldwide colossus with sales of $25 billion.

Michael Otto, 59, has aggressively pushed to countries beyond Germany, including the U.S., where he has a majority stake in Crate & Barrel. (The family separately owns the Spiegel catalog group, which includes Spiegel, Eddie Bauer and Newport News, an online women's-clothing retailer.) Otto has also invested heavily in technology, including e-commerce, to improve efficiency, cut costs and reach out to customers. Last year the company turned a profit for the first time on its online sales, which reached $1.9 billion. Otto boasts that it's the second largest Internet retailer after Amazon.com. The advantages of running a closely held family company are that "I can always think long term and not have to look at short-term profits," he says. That means he can make big investments in technology, including e-commerce, without feeling pressure from stock analysts and investors.

It also means he can follow his environmental convictions, even if that weighs on earnings temporarily. For example, the company has stopped selling products made of tropical wood and has undertaken a comprehensive and costly effort to ensure that many of the garments it sells are made of organically grown cotton (only natural fertilizers are used) or other environmentally correct materials. "I found it important to do this," Otto says, and since the family owns 85% of the company, there's nothing to stop him.