CORRECTED-UPDATE 2-Schmolz + Bickenbach to raise cash to fend off 'steel crisis'

(Corrects Vekselberg stake to 26.91%, (not 27.5%), in fifth paragraph)

* Swiss billionaire seeks bigger stake in steelmaker

* Schmolz says needs cash to fend off “crisis in steel industry”

* Russian oligarch Vekselberg now biggest Schmolz owner

ZURICH, Oct 23 (Reuters) - The scion of a Swiss automobile dynasty is seeking to overtake Russian oligarch Viktor Vekselberg as the largest shareholder at embattled Schmolz + Bickenbach as the Swiss steelmaker fights for survival by raising fresh cash.

Swiss car dealership billionaire Martin Haefner, who owns 17.5% of Schmolz, Refinitiv data shows, has pledged to contribute up to 325 million Swiss francs ($329 million) of a possible 350 million franc capital increase.

The company said on Wednesday it needed new money after becoming trapped in the crisis which has hit the steel industry.

However, Haefner said he would only pump in the money if he gets a stake of at least 37.5%, is freed from being required to make an offer for the rest of Schmolz shares and gets two board members nominated by his company, BigPoint Holding.

The move would put Haefner’s ownership ahead of Vekselberg, whose Renova Group has 26.91% of the steelmaker that cut its profit target again on Wednesday.

Schmolz + Bickenbach now expects adjusted EBITDA to miss the 70 million euros ($77.85 million) to 100 million range that it issued in September.

The Lucerne-based company, which supplies the aerospace, auto, medtech and mining sectors, plans a Dec. 2 extraordinary general shareholders meeting to vote on the capital hike.

Schmolz + Bickenbach said it had been caught in a downward spiral exacerbated by trade conflicts and global political uncertainty which has led to a sharp downturn in steel demand.

“The weakness in the most important end markets, such as the automotive industry ... led to a crisis in the steel industry that Schmolz + Bickenbach was unable to escape,” Schmolz said.

“After examining all feasible options, the Board of Directors decided to propose to the shareholders an increase of the share capital.”

The capital increase is projected to total between 189 million Swiss francs and 350 million francs.

In 2018, Vekselberg trimmed what had been a 42% stake in Schmolz + Bickenbach.

At the time, he was decreasing ownership in other Swiss companies including Sulzer and OC Oerlikon, a result of him having been placed under sanctions by the United States in the crackdown on President Vladimir Putin’s inner circle over alleged Russian interference in the 2016 U.S. election.

A spokesman for Vekselberg did not immediately return a message seeking comment.

$1 = 0.9894 Swiss francs $1 = 0.8992 euros Reporting by John Miller, edited by John Revill and David Evans