By Philip Pullella

SOLOMEO, Italy (Reuters) - Motivated at age 15 by the tears in his father's eyes when the former farmer was forced to accept a factory job, Brunello Cucinelli is anything but an orthodox capitalist.

His colourful cashmere brand is defying recessionary shrinkage across the luxury sector -- a feat achieved while creating ideal conditions for his workers.

He has converted most of a stone 14th-century town in Umbria into a factory where no-one punches a time clock, lunch breaks are generous and the only rules pasted on the walls are quotes from philosophers and writers.

"I believe in real capitalism. The company has to make profits," he said in a sprawling, spotless office lined with shelves of spools of cashmere on one side and philosophical treatises on the other.

"But I want to try to do it with the ethics of human dignity."

Consultants Bain & Co. forecast global sales of luxury goods this year will fall by about 8 percent to 153 billion euros. But Cucinelli, who can collect more than $2,000 for a single garment, is still expanding.

In September his privately held Gruppo Cucinelli opened a new mono-brand store on Rome's exclusive Via Borgognona near the Spanish Steps. There are plans for 10 more by end-2010.

Revenues in 2009 are forecast at 154 million euros, around seven percent more than last year. It's a slowing trend from double-digit gains in both sales and profit in previous years, but puts Cucinelli in select company: Hermes and Louis Vuitton are among the only luxury brands growing this year.

"Brunello Cucinelli's ... is an understated product -- it's not logo-mania -- and highly sophisticated," said Armando Branchini, head of Milan fashion consulting firm Intercorporate.

The combination of classic style with a modern touch, thorough workmanship and very high quality basic materials is, he said, helping Cucinelli and another Italian cashmere brand, Loro Piana, to win market share.

For the designer, whose garments are sold in 29 dedicated stores in places like New York, Paris, Beverly Hills, London, Saint Tropez and the Hamptons and in high-end department stores such as Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, success just part of the objective.

When Cucinelli, now 54, was a teenager, his father stopped being a farmer and got a job in a cement factory and Cucinelli noticed a deep change.

"He came home from the factory with tears in his eyes and I resolved that whatever I would do with my life it would be an attempt to make work more human," he said.

ASPARAGUS GREEN

Cucinelli was one of the first in Italy to use cashmere dyed with bright colours on a large scale -- similar to what Benetton did with sweaters, but for a very high-end customer. Asparagus green is one of his notable shades and shirts start at $500.

In 1985 he bought a run-down 14th-century castle in the Umbrian hill town of Solomeo, home of his future wife, and moved the headquarters of his company there after restorations were well underway in 1987.

His company has some 500 in-house employees and about 1,000 outside contractors. Cashmere from Mongolia is imported and prepared by another Italian company under strict Cucinelli specifications.

The full-time employees work either in the upper part of the town, where sample garments are designed and created for the sales force, or in a new building in the lower part of the town, where the bulk of the garments are produced.

The walls near the plant, which now occupies much of Solomeo, are lined with ceramic plaques showing aphorisms Cucinelli wants his workers to mull on as they go about their daily lives.

They include Socrates: "A life without searching is not worth living;" Aristotle: "Nature does nothing that is useless;" and Galileo: "Behind every problem lies an opportunity."

From the outside, the stone buildings that house the cutting rooms, the designers' studios and offices give no hint of what is going on inside.

On one recent autumn day, some women worked in a small room using specialised machinery to stitch together pieces of garments while nearby colleagues looked under large magnifying glasses to check quality.

"Compared with previous jobs I have had, I like it very much," said Daniela Allumi, who has been in the garment industry for 40 years. "We grandmothers and mothers have family problems from time to time and when we do they are very flexible here."

At 1 p.m., no bell or horn rang but the workers walked leisurely across the road to the company "restaurant" -- one doesn't call it a canteen -- for a 90-minute lunch break.

PROFIT FROM DIGNITY

"The underlying question is what do to with the profits," said Cucinelli, whose mother worked stitching at home for a large Umbrian clothing company.

He started his first cashmere business in 1978 in a tiny workshop, and sent his first creations to Germany and the United States "because there they paid right away".

Now living in a very comfortable villa, Cucinelli plays on a local soccer team and sometimes joins in poker at the local bar.

He has built a 230-seat theatre to be used as a regional repertory theatre and workers and residents can relax in an olive orchard garden around his villa or use a sports complex he built.

"Part of the profits have to go to help humanity. That means a church, a theatre, or a work of charity. That is what I think the system of business should be," he said.

No one in Solomeo checks if a worker comes back on time from lunch. Those who choose to eat at the factory pay only 2.80 euros for a three-course meal cooked by local women using local ingredients. The place runs on an honour system.

"When the human being finds favourable conditions of life he is more creative," said Cucinelli. "If we want to make high-quality goods we need human beings. To convince the human being to do a humble work we have to make that work dignified."

(Additional reporting by Marie-Louis Gumuchian in Milan and Astrid Wendlandt in Paris: Editing by Sara Ledwith)