"Excuse me, Mr. Arnault, but that is not my style. Can you imagine if we did a deal and my shareholders found out that my salary was increased?" De Sole said, according to people involved. "They would be outraged!"

Arnault says he is stunned by De Sole's account. "That is completely untrue," he says. "That is just something written by De Sole for a lawsuit. It has nothing to do with truth. We discussed nothing more than what our boards wanted and how our companies could work together."

In any case, De Sole left the meeting determined to block Arnault by any means necessary. "It is against Arnault's principles to make fair offers for companies," he says.

Arnault responded by suing De Sole for mismanagement in Dutch court, in Amsterdam, where Gucci is incorporated. But while the court deliberated, De Sole rallied a team of Wall Street lawyers and bankers to search for a white knight. They found François Pinault, a rival French financier who bought a 42 percent stake in Gucci in a scheme to merge it with a handful of new brands, including Yves Saint Laurent and Oscar de la Renta perfumes. His plan is to turn Gucci, under De Sole and Ford's direction, into a new luxury behemoth that could become Arnault's biggest competitor.

Sitting at a baby-blue table in a room full of child-size designer clothes at the New York headquarters of Christian Dior, at the corner of Fifth Avenue and 56th Street, Arnault, six feet two, dressed in a dark double-breasted Dior suit and preppy tie, hardly seems predatory. Above his pale-blue eyes and thick, arched eyebrows, his gray hair stands up straight in an odd cowlick, earning him the nickname Tintin. Another of Arnault's nicknames is "the wolf in cashmere." Arnault throws up his hands at the image. "What do you expect," he says, "from people who are trying to hurt you?"

In fact, for all his ruthless reputation, Arnault seems shy and gentlemanly, with interests to match: He's an accomplished amateur at the piano, with a passion for Chopin (his wife is a concert pianist).

Arnault sees himself not as a wolf but as a visionary. "It is a trend for the last ten years for brands to get together, for one simple reason. It is the world market, to be reached globally, that requires a much greater investment. One brand alone will have great difficulty," he says. "When you buy Dom Pérignon or Dior perfume, or a Vuitton bag, you don't know it belongs to the same group. It is only backstage that you find the economies of scale that is the basis of our success."

If economies of scale can be wrung out of the luxury business, Arnault is certainly in a position to do so, having parlayed his small family fortune into control of a $23 billion fashion, leather, perfume, and champagne empire. He controls, in addition to Louis Vuitton, the fashion and perfume labels Christian Dior, Givenchy, Christian Lacroix, Loewe, Kenzo, Guerlain, Berluti, and Céline as well as the jeweler Fred. His company's prodigious liquor cabinet of top-shelf brands includes Hennessy cognac and the champagnes Moët et Chandon, Dom Pérignon, Pommery, Krug, and Veuve Clicquot. And even as he fends off Gucci's counterattacks, Arnault is fast expanding elsewhere. In Italy, he has agreed to begin cooperating with Prada and has been in talks with Giorgio Armani about a possible acquisition. In New York, he bought the cosmetics brand and spa Bliss World and a stake in the hot design house Michael Kors, whose designer he hired at Céline. LVMH's retail division is opening a new flagship for its Sephora high-end cosmetics-and-fragrance chain across the street from Saks Fifth Avenue.

To mark the company's expanded presence in New York, Arnault has commissioned a new North American headquarters at 57th Street and Madison Avenue, a singular green-glass skyscraper designed by the French architect Christian de Portzamparc. The façade of the new building -- LVMH will move in September -- is cut inward at jagged angles to evoke the shape of a seashell or the opening-up of a flower. A gigantic, multicolored lighting system will add to the visual spectacle. Louis Vuitton's American flagship store is slated to occupy the ground floor, and the U.S. headquarters for the rest of his design houses will be consolidated above. "We want to centralize the LVMH brain trust in the U.S.," he says. Still, there will be walls. LVMH's many perfume brands' fragrance teams have demanded strict assurances that their internal competitors won't be able to peek at their research.

The Asian crisis, Arnault says, has vindicated his company's strategy. In the past twenty years, U.S. and European luxury-products companies have come to rely on Japanese and other Asian consumers for the lion's share of their sales. When the Asian economic crisis hit, it decimated the region's demand for excesses like a Gucci handbag or Vuitton luggage. As a result, both companies saw their stocks fall by as much as 50 percent. "Companies on their own, like Gucci, were hit very strongly," Arnault says, "but a group that is diversified as we are has more areas of business to weather a bad situation like 1998 -- champagne was booming; it had its most fantastic year." And even though LVMH stock was also hit hard by the crisis in Asia, Arnault says, he had enough in his war chest to capitalize on Gucci's weakness.

One of Arnault's favorite examples of his companies' synergies is really a recruitment pitch, directed in part at Tom Ford. "Perhaps our most important advantage is our ability to attract talent," Arnault says. "To be a designer or manager at one of our brands is not at all different from being in a medium-size company but with the investment muscle to grow. When a young, talented designer or executive comes to work with us, he has more potential to grow, to move up. And guess what happens? The best talent comes here."