BERLIN: Seven-time Formula One champion Michael Schumacher is coming out of retirement to drive for Mercedes in 2010, saying he expects to contend for the title again.

The German, who turns 41 on January 3, announced his comeback today after three years away from the sport that he dominated for the first half of the decade.

Schumacher, who will partner Nico Rosberg in an all-German team for the 2010 season, said he and Mercedes are in discussions about a deal through the 2012 season. “We are talking about a three-year deal. It’s not a one-off thing,” Schumacher said. Financial terms were not disclosed, but Germany’s Bild daily reported that Schumacher would earn $10 million under an initial one-year contract.

Schumacher competed in 249 F1 races from 1991-2006 with Jordan, Benetton and Ferrari. He won the F1 driver’s championship in 1994 and 1995 and five straight years from 2000-2004. He set records with 91 race wins and several other milestones in the sport which still stand.

Schumacher had planned a short-term comeback with Ferrari last season to fill in for the injured Felipe Massa, but he had to call that off due to a neck injury from a motorcycle accident.

Schumacher had been working as a consultant with Ferrari since his retirement, attending some F1 races. He said he had not envisioned a permanent comeback until approached by Mercedes team principal Ross Brawn — the man who oversaw the German’s seven world titles: five with Ferrari and two with Benetton.