SAO PAULO, Oct 7 (Reuters) - The division between the two controlling shareholders of Usinas Siderúrgicas de Minas Gerais SA risks destroying the Brazilian flat steelmaker, a senior executive at minority shareholder and rival Cia Siderúrgica Nacional SA said on Friday.

The business relationship between controlling shareholders Nippon Steel & Sumitomo Metal Corp and Techint Group, marked by two years of disputes and mutual lawsuits, has resulted in significant declines in the value of Usiminas, Luiz Paulo Barreto, a corporate director at CSN, said in an interview.

The dismal performance of Usiminas since Nippon Steel worked to oust Techint from management in September 2014 is a sign that the strategy has failed, Barreto added. The dispute has reached "irrational levels" and is penalyzing all shareholders, including CSN, clients and, especially, employees, he added.

"Every time that there's light at the end of the tunnel, something happens to get us in the dark again," Barreto said. "This endless dispute threatens to destroy Usiminas."

The rift reached new heights on Thursday, when a judge in the state of Minas Gerais, where Usiminas is based, annuled the outcome of a May 25 board meeting that replaced Nippon Steel-backed Chief Executive Officer Rômel de Souza. Souza was reinstated early on Friday.

São Paulo-based CSN owns 14 percent of Usiminas common shares and 20 percent of the company's preferred stock. Both companies compete in Brazil's flat steel sector, which produces plate, slab and rolled steel products widely used by car and home appliance makers.

Efforts to obtain comments from Nippin Steel and Techint outside business hours were unsuccessful.

(Reporting by Tatiana Bautzer; Writing by Guillermo Parra-Bernal; Editing by Bernard Orr)