Ontario jobs at risk if Detroit Three fail -report

TORONTO Dec 16 (Reuters) - If the Detroit Three automakers go out of business, the Canadian province of Ontario could lose 517,000 jobs by 2014, the Toronto Star newspaper reported on Tuesday, citing a new provincial report to be released later in the day.

The review, prepared for the Ministry of Economic Development, warns the collapse of General Motors (GM.N), Ford (F.N) and Chrysler [CBS.UL] would send lasting shock waves through the economy.

The report states a permanent contraction of the industry would negatively impact the United States, and the global economy, reducing the demand for Canadian exports from all industries, which would depress prices of commodities such as oil and minerals.

The bankruptcy of any of the big automakers might have serious implications for their pension funds and retirees' incomes.

The study suggests "more than 80 per cent of the parts industry would vanish in the event of the failure of all three Detroit companies," which would temporarily disrupt foreign automakers' production in North America, the newspaper reported.

A subsequent housing slump would cast a pall over construction jobs as well as hurt the retail, insurance, real estate and financial services sectors.

If auto output by U.S.-based manufacturers in Canada were cut in half, at least 157,000 jobs would be lost right away, 141,000 of them in Ontario, the newspaper reported, citing the provincial report. By 2014, job losses would rise to 296,000 nationally, including 269,000 in Ontario.

If production were to cease completely, 323,000 jobs would be lost immediately in Canada, including 281,800 in the province, rising to 582,000 nationally and 517,000 in Ontario by 2014.

"The depreciation of the dollar, lower interest rates, and lower production costs eventually help the economy to partially recover (over the following five years, 2015 to 2019) but the loss of the Detroit Three leaves a permanent dent in Canada's economy in terms of jobs and output," the newspaper quoted the report as saying.

The report comes as the governments of Canada and Ontario are preparing an aid package that could be worth C$3.5 billion ($2.85 billion) if Washington comes through with a $14 billion rescue. ($1=$1.23 Canadian) (Reporting by Jennifer Kwan, editing by Dave Zimmerman)