FRANKFURT (Reuters) - Thyssenkrupp said on Saturday its steel division must be restructured to fund investment needs with its own earnings, but that the parent company had provided financial security for the next two years.

The comments from Thyssenkrupp CEO, Miguel Lopez, came after the chairman of the steel division said the business needs to bridge a 1.3 billion euro ($1.4 billion) funding gap.

Sigmar Gabriel of Thyssenkrupp Steel Europe (TKSE) made the funding comment late on Friday after a supervisory board meeting.

The parent company is cutting is its stake in the unit, which is suffering from a drop in demand and steel product prices.

Lopez said that the purpose of the ongoing turnaround efforts was to enable TKSE to earn enough money on its own to fund its investment needs and to cope with any temporary down cycle in the future.

He also warned against any speculation about an insolvency.

"The financial needs of Steel Europe for the next 24 months will be secured by Thyssenkrupp AG. That should put an end once and for all to any speculation. There was never the danger of insolvency and there won't be now," Lopez said in a statement.

The dispute comes after new investor Czech billionaire Daniel Kretinsky last week closed the purchase of a 20% stake in TKSE and is in talks to buy a further 30%. Kretinsky was at Friday's board meeting.

Gabriel, a former federal minister, also said on Friday an external audit would now be carried out before the end of the year to determine the unit's restructuring and funding needs.

Lopez added on Saturday that this audit would serve to see TKSE in a "sober and realistic" light.

The sale of TKSE, which is closely tied to Germany's history as an industrial heavyweight, has been fraught with difficulties for years, mostly because the business needs billions of euros to keep investing and regain competitiveness.