UPDATE 1-Continental to examine full merger with Schaeffler

* Results expected by end of July

* Industrial logic "obvious" - Continental Chairman

* Non-automotive businesses could remain to balance business

* Schaeffler's Industrial, Continental's Rubber ops may stay

(Adds detail and background)

FRANKFURT, June 8 (Reuters) - Indebted car parts maker Continental (CONG.DE) will examine a full merger with its ailing large shareholder, German bearings maker Schaeffler, that would create a company with some 33 billion euros ($45.6 billion) in sales.

"The industrial logic of this combination is obvious," Continental supervisory Board Chairman Ralf Koerfer said in a statement on Monday.

Results of a review should be completed by the end of July.

While both companies have already agreed on a cooperation to bundle purchasing, the announcement represents the first real sign of a potential breakthrough in a power struggle that has seen the departure of senior executives on both sides.

Koerfer and board member Juergen Geissinger -- both nominated by Schaeffler to the board and approved by shareholders in April -- spoke out clearly in favour of a merger.

"I am convinced that a merger could bring operational and technologic advantages for both companies and their customers. The central question is how the industrial concept can best be implemented," said Geissinger, who also serves as chief executive of Schaeffler.

Lenders that financed the privately-owned bearings maker risky leveraged takeover of Continental have continued to provide loans to Schaeffler to buy time for a solution and avoid necessary writedowns under a debt-for-equity swap.

Continental CEO Karl-Thomas Neumann said talks with Schaeffler were proceeding constructively and was optimistic regarding a tie-up that could very likely see all operations including Continental's tyre and non-tyre rubber activities remain under a merged company.

"Along with the Rubber Group, Schaeffler's Industrial business would significantly improve the necessary balance between the automotive and non-automotive businesses of the new group," Neumann said in the statement.