* Neumann loses support of shareholder reps on board
*needs simple majority to axe Neumann as CEO
* Board approves plans for capital hike of up to 1.5 bln eur
* Conti to then start debt restructuring talks with lenders
(Adds details, background)
HANOVER, Germany, July 31 (Reuters) -AG won a vote to repair its finances but will likely lose its second chief executive in less than a year amid a bitter power struggle with German ball-bearings maker .
Deputy Chairman Werner Bischoff said Schaeffler failed to gain a two-thirds majority on the supervisory board to oust Neumann, but aims to unseat him within two weeks through an arbitration process that needs just a simple majority.
"A good man is leaving," labour representative Bischoff said late on Thursday after a meeting of the board.
Last July, Schaeffler launched a hostile $18 billion bid for Continental but ended up collecting more shares than it could afford, lumbering it with billions of euros in debt.
Schaeffler currently owns just under 50 percent of Continental, while another 40 percent of shares it was tendered are parked with banks.
The German media reported earlier that Schaeffler tried to oust Neumann and replace him with the head of its own automotive business, Elmar Degenhart.
According to the reports, Schaeffler also aims to install its finance chief in the position of CFO at Continental, a post that has been vacant since Alan Hippe left in April.
Bischoff denied that a successor was already named.
"We are still not far enough that we can discuss who's next," the IG BCE trade unionist said.
Earlier, Neumann did succeed in gathering enough support among board directors to approve management preparations for a capital increase of up to 1.5 billion euros that would significantly dilute Schaeffler's indirect stake of 90 percent.
"If Conti can operate from a strong financial foundation, then that also helps Schaeffler," Neumann said in a statement, adding though that in the process he had to struggle with some unusual and very disappointing developments.
"These make it very, very difficult for me to work over the long term in cooperation with our large shareholder," the embattled CEO said.
Continental said it will begin talks with its creditor banks over restructuring its debt, in particular in view of the 3.5 billion euro ($4.93 billion) second tranche loan payment due in August of next year.
Continental already faces an 800 million euro cash call next month for the first tranche of the syndicated loan, meaning the company would altogether have to pay off debt over the next 12 months roughly equivalent to its current market value.
(Reporting by Arno Schuetze)