Seven-time Formula One world champion Michael Schumacher has signed a contract with the Mercedes team for 2010.

The 40-year-old German will be coming out of retirement for a deal worth 7 million euros ($10 million). Although the contract is for one year, Schumacher told reporters he had longer-term plans.

"After a three-year break, I have all the energy again that I was lacking," Schumacher told a teleconference with reporters after signing the contract late on Tuesday. "We are talking about a three-year deal. It's not just a one-off thing. We are talking about continuation."

Schumacher had been due to make a return last season for Ferrari but was forced to pull out due to a neck injury. He said on Wednesday however that the pain was behind him.

"My neck is no longer a problem," Schumacher said. "Over the summer it was too soon after the accident. Now everything has healed."

New team, same connection

Schumacher left Formula One in 2006 after winning seven titles with Benetton and Ferrari. His technical director at both teams was the Briton Ross Brawn, who currently heads the newly formed Mercedes team. Deutsche Welle's Formula One expert Mark Hallam says Brawn's presence played a big role in Schumacher's decision to sign with Mercedes.

"These two guys owe each other their legacy," Hallam said. "Schumacher's seven world titles, with Benetton and later Ferrari, all of them were won with Ross Brawn as his technical director - in other words, the man on the pit wall who makes things happen."

Schumacher already tried to re-enter the sport this year, standing in for injured Brazilian Felipe Massa for Ferrari. But a neck injury, sustained in a motorcycle accident, stymied the comeback attempt.

Four months after being forced to abandon his comeback with Ferrari, Schumacher may not have had the option to sign with his former team again.

"They've just signed up Schumacher's old arch-rival, Fernando Alonso of Spain to lead their charge next year," Hallam said. "They've also got Schumacher's old teammate and one of his good buddies, Felipe Massa, coming back from injury."

Shot in the arm for F1

The 2010 Formula One season gets underway in March in Bahrain. By then, Schumacher will have turned 41, which raises the question of whether or not he can still be as competitive behind the wheel as when he was younger. Schumacher insists he's returning to the sport as a serious contender.

"Our aim can only be to fight for the championship," he said.

Schumacher's teammate in 2010 will be 24-year-old Nico Rosberg, which makes Mercedes an all-German team.

"It is fantastic that Michael is returning to Formula One and will be my teammate," Rosberg said. "I'm sure that we will form a very strong partnership as he will have lost none of his speed."

As for the other drivers on the circuit, Schumacher's return will give some of the younger competitors a chance to take on the master. 2008 world champion Lewis Hamilton of Great Britain and 2009 German runner-up Sebastian Vettel hadn't even started competing in Formula One when Schumacher retired in 2006. Hallam speculates that one of two things will be going through the minds of the other drivers as the season gets under way.

"I would imagine that almost everyone on the grid will be A, chomping at the bit to beat the old master, and B, petrified that the old master might show some of the young whippersnappers that they're not quite as good as everyone thought they were."

"It's going to be exceedingly difficult for him," Hallam adds, "But if there's one lesson that anyone who watched motorsport in the late 1990s and first part of this decade learned, it's that you write Michael Schumacher off at your peril."

Should Schumacher win his eighth Formula One world title, he would become the oldest champion of the sport's modern age.

mz/dfm/hf/Reuters/DPA/AP

Editor: Chuck Penfold