Formula One team Mercedes have given seven-time world champion Michael Schumacher an ultimatum - improve next season or have your contract terminated early, it was reported Thursday.

The 41-year-old, who won the last of his world titles in 2004, came out of retirement to race for German team Mercedes this season and is currently in 10th place in the World Drivers' Championships (WDC).

Without naming their source, German daily Bild report Schumacher has been given an ultimatum to improve in 2011 or have his three-year contract, reported to be worth 63 million euros, terminated after just two years.

Despite his reputation having won 91 Grand Prix races in his career, patience at Mercedes is said to be wearing thin with Schumacher who is behind seventh-placed team-mate Nico Rosberg, 25, in the WDC.

Since returning to Formula One, "Schumi" has finished no higher than fourth this season at the Barcelona and Istanbul Grand Prix.