By Arno Schuetze and Christiaan Hetzner

HANOVER/FRANKFURT, July 31 (Reuters) - Continental AG won a vote to repair its stretched finances but may lose its chief executive and faces pressure to sell its tyres business as a power struggle with its main shareholder drags on.
Car parts maker Continental said on Friday a boardroom push by Schaeffler to oust Chief Executive Karl-Thomas Neumann had failed, but Schaeffler aims to try again to unseat him at a further meeting scheduled for Aug 12.
Continental shares fell 6.3 percent to 25.41 euros by 0946 GMT, while the German midcap index was flat.

Last week another battle for supremacy in Germany's automotive sector, pitting Porsche against Volkswagen, ended in the sportscar maker's defeat and its Chairman Wolfgang Porsche fighting back tears on national television.
Schaeffler acquired its stake in Continental after launching a hostile $18 billion bid last July, ending up collecting more shares than it could afford and lumbering itself with billions of euros of debt.
The German ball bearings manufacturer now owns 49.9 percent of Continental directly. Another 40 percent of shares it was tendered is parked with banks.
On Thursday, Neumann gathered enough support among board directors to approve preparations for a capital increase of up to 1.5 billion euros ($2.1 billion), which Schaeffler could not afford to subscribe to.
"Following the ... capital increase, Schaeffler's stake in Continental will be diluted to below 75 percent, meaning the loss of dominance. Conti will thus shake off the iron grip of its debt-laden owner," said BHF Bank analyst Aleksej Wunrau.
Continental faces an 800 million euro cash call next month for the first tranche of a syndicated loan, and a 3.5 billion euro payment for the second tranche due in August 2010 -- a total sum equal to the company's current market value.

Continental has been seeking ways to reduce a debt burden of nearly 10 billion euros. It said on Thursday it will begin talks with its creditor banks over restructuring its debt, in particular the second tranche loan payment due next year.
Having opposed a capital increase, Schaeffler revived a call to sell Continental's tyre business during Thursday's board meeting, sources told Reuters.
"Schaeffler said ... the rubber tyre business would not count as a core business and that selling it was an option," a supervisory board member told Reuters on Friday.
Other board members said that, given the tough market environment, a quick sale could not be expected.
UniCredit credit analyst Sven Kreitmair said a capital increase would be significantly positive for Continental's debt because the company could then amend and extend loans.
"This (capital increase) might allow Conti to tap the hybrid bond market as a refinancing source," he said.
That assessment was reflected in Continental's five-year credit default swap, which tightened some 60 basis points having rallied around 450 points in the past three weeks, according to Markit data.
"Another rights issue would be a positive, but if it goes ahead, it is not clear who would be buying it," RBS credit analysts said in a note.
"Success would depend on bringing in another investor in all probability and the timing of the rights issue will also be significant with a tough September covenant test looming."
Neumann said in a statement that it would help Schaeffler as well if Continental's financial foundation was strengthened, though some disappointing developments had made it "very, very difficult for me to work over the long term in cooperation with our large shareholder."
(Additional reporting by Maria Sheahan and Marilyn Gerlach; editing by John Stonestreet) ($1=.7095 Euro) ($1=.7085 Euro) Keywords: CONTINENTAL/

(marilyn.gerlach@thomsonreuters.com; Reuters Messaging: marilyn.gerlach.reuters.com@reuters.net; +49 69 7565 1279)

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