“This crisis is a terrible thing to waste.”

That was the key message coming out of a seminar last week at UCLA’s Anderson School of Management aimed at telling local executives how companies can thrive during the recession.

More than 200 executives were told they needed to keep core people on board, strengthen their balance sheets, trim unprofitable business lines, and be ready to pounce on investment opportunities and grab market share from overly cautious competitors.

“For those companies in a strong cash position, assets can be had at terrific prices right now,” said Antonio Bernardo, professor of finance at Anderson. “If you invest now when your peers and competitors are waiting on the sidelines, you can be a leader in your industry when the recovery does come.”

One executive in attendance said her company has already started taking that advice.

“We have a healthy balance sheet and we are looking to expand,” said Jasna Penich, chief financial officer at Malaga Bank in Palos Verdes Estates.

In the context of daily headlines about companies cutting thousands or even tens of thousands of jobs and high unemployment levels, executives were also cautioned not to go overboard with layoffs. While temporary and part-time workers and independent contractors can and should be cut when necessary, full-time employees central to the company’s core business should not be let go.

“In a deep recession like we’re in right now, consider cutting pay rates and benefits, but keep your core people in their jobs,” said David Lewin, a management consultant, author and professor of human resource management at the UCLA Anderson School of Management. “If you start cutting those core people, when the economy does turn, you’re going to have a very difficult time hiring people back.”

Two more quarters

When will the economy make that turn? UCLA Anderson Forecast director Ed Leamer said that two more quarters of negative growth are ahead before the bottom.

But Leamer said much will depend on when consumer confidence returns. “This recession is being driven so much by consumer psychology, which makes it awfully difficult to make predictions.”

All three panelists said consumer panic not the credit crisis or the shaky banking system is the biggest problem confronting the U.S. economy. It’s a phenomenon that executives in attendance seemed to sense.

“The level of fear that has gripped the consumer is incredible. It’s really more of a panic mentality right now,” said Michael Anderson, director of retirement planning at the Beverly Hills office of Finestone Partners, which sells securities through Raymond James Financial Services Inc.

Anderson said he will be trying to grow his business during this downturn: Many investment advisers have left the business, so it’s a perfect time to pick up new clients.

But companies in some industries may not find it so easy to expand, Leamer said. For instance, retail-oriented businesses will find it tough going even after the recovery begins. That’s because Americans are going through a historic shift away from increased consumption toward more saving. As a result, the focus will turn to an economy where products are made for both domestic and overseas markets.

“The job ahead is to turn malls into factories,” Leamer said. “That’s where the opportunities will be.”

This was news to Michael Popwell, real estate appraisal manager for the Los Angeles Community Redevelopment Agency, which has spent much of the last 25 years turning abandoned factories into retail space. Given Leamer’s comments, that would mean the agency would have to do a U-turn.

“I think this advice is right on,” Popwell said.