UPDATE 1-Cleveland-Cliffs backs Ancora in Norfolk Southern proxy battle, Bloomberg says

(Adds details of Cleveland-Cliffs letter, Norfolk Southern response, background, paragraphs 2-8)

April 28 (Reuters) - U.S. steelmaker Cleveland-Cliffs , a Norfolk Southern customer, has backed activist investor Ancora Holdings in its effort to have seven directors and a new chief executive officer installed at the railroad operator, Bloomberg News reported on Sunday.

Cleveland-Cliffs CEO Lourenco Goncalves said in a letter to Ancora that the outcome of the proxy fight will have no impact on its customer or supplier relationship with Norfolk Southern, the report added.

"We believe in shareholder activism when the activist has a plan and knows how to execute the plan," Goncalves wrote in the letter cited in the Bloomberg report.

Norfolk Southern said in response to the Cleveland-Cliffs letter on Sunday: "It is unfortunate that Ancora continues to mislead our stakeholders about their strategy." It added that the "mathematic reality" of Ancora's proxy fight would require thousands of furloughs.

Cleveland-Cliffs did not immediately respond to Reuters' requests for comment.

In February, a group of investors led by Ancora Holdings proposed the replacement of Norfolk Southern's top management, including its CEO, and nominated eight directors to the board.

The investor group, which has said it holds a large equity stake in the company, has been seeking to replace CEO Alan Shaw with former United Parcel Service executive Jim Barber. It also seeks to replace Norfolk Southern's chief operating officer, Paul Duncan, with Jamie Boychuk, a former executive at CSX.

Norfolk Southern has offered to add two new directors to its board, while rejecting all eight of Ancora's candidates, saying none would bring fresh skills or experience. (Reporting by Gnaneshwar Rajan in Bengaluru Editing by Matthew Lewis)