* Koerfer seen as violating neutrality principle -sources
* Independent board member backs CEO dismissal -paper
* Chairman Koerfer to relinquish position - sources
(Adds additional source comment, background)
By Arno Schuetze
HANOVER, Aug 10 (Reuters) - Rolf Koerfer may relinquish his position as supervisory board chairman at Continental under a possible compromise deal with controlling shareholder Schaeffler, sources familiar with the companies said.
Auto supply group Schaeffler's owners have offered Koerfer's resignation as part of a compromise deal that would also see the ouster of Karl-Thomas Neumann, Continental's current chief executive, the sources told Reuters on Monday.
Negotiations to find a solution come ahead of a showdown meeting between Schaeffler Group and fellow auto supplier Continental later this week, when Neumann's ouster is set to be discussed.
Schaeffler controls a 90 percent stake in Continental.
Neumann's departure is still a key demand and is being pushed for by Schaeffler, but could be delayed by up to six months, one person said.
Although Koerfer would give up his role as chairman, he may retain a seat on the 20-member supervisory board, sources said.
In Koerfer's place could come a candidate acceptable to both sides with a background in either finance or the auto industry, a person familiar with thinking at Continental said.
Supervisory board members are urging that Commerzbank, a lender to both companies, take a more active role at Continental, the sources said.
CLIPPING SCHAEFFLER'S WINGS
Schaeffler's suggested candidate for CEO, Elmar Degenhart, will probably replace Neumann although Continental's board could be expanded to five members from the current three, German daily Frankfurter Allgemeine Zeitung reported on Monday.
By padding the board with candidates not appointed by Schaeffler, Degenhart's influence would be curtailed, the paper said in a report released ahead of publication on Tuesday.
Schaeffler will use the compromise to try and delay a proposed capital increase, financial sources familiar with the companies said. Neumann had pushed for the capital hike, a move that threatened to dilute Schaeffler's stake.
Schaeffler's stake in Continental could shrink to about 66 percent following a capital increase.
Several sources familiar with the matter told Reuters on Monday that Schaeffler CEO Juergen Geissinger hoped the compromise would win over the 10-strong labour faction on the board, which has opposed a plan by the 10 shareholder representatives to oust Neumann.
The shareholder faction, led by five Schaeffler appointees, was expected to vote for Neumann's dismissal at a board meeting on Wednesday.
In the event of a tie between the labour and shareholder representatives -- something industry watchers are reckoning with -- Koerfer would hold the casting vote, which he would have to exercise before offering his own resignation.
Both companies declined to comment.
Another battle for supremacy in Germany's automotive sector, pitting Porsche against Volkswagen, ended last month in the sportscar maker's defeat and its chairman, Wolfgang Porsche, fighting back tears on television. Continental board member Hans-Olaf Henkel, who strongly supports Schaeffler's efforts to replace Neumann with its own man, said he expected all nine of his fellow shareholder representatives to vote likewise.
"I don't know of anyone who wouldn't confirm his (anti-Neumann) view once again," he said in an interview with the Frankfurter Allgemeine Zeitung published on Monday.
Schaeffler, a family-owned bearings maker one-third the size of Continental, launched a takeover bid for its larger rival that was financed by billions in debt just prior to the collapse of Lehman Brothers. (Reporting by Arno Schuetze and Philipp Halstrick; additional reporting by Christiaan Hetzner and Edward Taylor; Editing by Dan Lalor)