A giant silver teapot shines in the pale sun outside the Alessi factory, its scale a measure of how in the 1980s and 90s Italian kitchenware, from espresso-makers to lemon-squeezers, grew into objects of desire.

But the allure of great design and artisanal quality is failing to insulate this narrow valley and home of Lagostina, Alessi and Bialetti from Italy's worst post-war recession.

So modern that people often think they are new, the brands have grown through decades with the inhabitants of the valley near the Alps surviving war, poverty, landslides and avalanches. Now they are feeling the pinch.

Are we immune to the crisis? The answer is no, said Alberto Alessi, 62, design director and grandson of Giovanni Alessi, a lathe worker who founded the family firm in 1921.

Competition from low-cost Chinese or Romanian manufacturers, outsourcing and recession have shut down many family firms and dampened Italian manufacturing, which accounts for about one-fifth of output from the eurozone's third-largest economy.

Houseware exports, the main source of income for an area heavily reliant on manufacturing, fell 59 percent year-on-year to 62 million euros ($91.7 million) in the first six months of 2009.

Omegna, a peaceful strip of land on lake Orta in Piedmont region, owes its niche in houseware to craftsmen who emigrated to Germany in the 18th century to work in pewter, then returned home to set up their own businesses.

The industry employs 1,130 people in a territory of 160,000, according to a July estimate by the chamber of commerce -- 9 percent fewer than in 2008.

In the boom years of the '60s there were about 40 houseware firms in Omegna, recalled Alessi, whose creative drive helped transform his company into a top design brand.

That number has more than halved, although the resilience of the locals, forged by poverty and a rugged landscape, remains.

This province is trying to overcome the current difficulties by focusing on those quality products that have made us famous, said Roberta Costi at the chamber of commerce.

The combination of style and practicality that inspired Bialetti's trademark Moka express and Lagostina's first stainless steel saucepans -- which are on display at the Museum of Modern Art of New York along with Alessi's coffee machine 9090 -- are key factors to counter the competition.

Sixteen houseware firms have teamed up with the chamber of commerce to explore new markets like Russia and develop innovations, for example by using nanotechnology, whose uses could include making stainless steel knives sharper.

Thirteen firms are due to showcase a new quality brand Lago Maggiore Casalinghi (Lake Maggiore Houseware) by the end of this year.

STABLE IN EUROPE

Sales in the U.S. and in Japan have suffered, while they have remained stable in Europe, Alessi told Reuters in an interview at the firm's offices in Crusinallo, near Omegna.

Exports account for 60 percent of Alessi's annual revenues and the company employs around 200 international designers and 500 employees crafting 60 new projects a year.

Even top companies like Lagostina are facing the consequences of outsourcing production, said Costi at the chamber of commerce.

The stainless-steel cookware maker, founded by Carlo Lagostina and his son Emilio in 1901 and now owned by the French small appliances group SEB, is in talks with unions over possible redundancies among the 200 employees.

It has ruled out plant closures, saying Made in Italy branding retains strategic value: exports account for more than a third of its income.

The group is firmly convinced about keeping R&D and high-end production in Omegna, SEB said in a statement.

Coffee-machine maker Bialetti Industrie -- founded in 1919 by Alberto Alessi's maternal grandfather, Alfonso Bialetti, and majority-owned by Chairman and Chief Executive Francesco Ranzoni -- reached an agreement in April with more than 90 percent of its creditors to keep credit lines open for another year.

Last June they approved a three-year business plan to boost revenues and reduce debts. The company's stock, listed in Milan, trades at around 0.5100 euros, above a low of 0.164 euros reached in March. It launched in July 2007 at 2.50 euros.

WAKE AT THE FACTORY

People say it helps that family ties are so deep-rooted in this little industrial district, where 79 percent of the 5,000 craftsmanship firms are individually run.

When Alberto Alessi's father Carlo died last August at 93, his wake was held at the factory. Only family members sit on the board. A reproduction of Carlo Alessi's Bombe tea and coffee service -- still the company's most successful design after more than 50 years -- stands outside the factory in Crusinallo.

We are closely tied to this valley. Our family was born here, said Alessi.

If you ask me if our factory will still be in Omegna in 20 years, I can't answer you, he added. But I can tell you that we need our skilled workforce to turn our ideas into reality.

Economists say the outlook for Italy's 1.5 trillion euro economy, which entered recession in spring 2008, is for a timid return to growth in 2010, behind France and Germany.

Manufacturing activity in Italy in September shrank at its slowest rate since May 2008, beating expectations. But analysts warn the rebound may run out of steam at the start of next year.

In the nearby mountain village of Forno, whose name recalls the metalworking furnaces, 87-year-old Giuseppina Tonoli remembers when she went to work for Alfonso Bialetti as a housekeeper.

I was 14, she said, sitting in her tiny wooden kitchen. I was so beautiful and strong.

(editing by Sara Ledwith)

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