The report claims Mercedes is offering the seven-time World Champion a new contract for 2013, while Schumacher is apparently pushing for a unilateral option that would allow him to decide to keep racing in 2014, as well.
The carmaker's motor racing president Norbert Haug said: "There is still no decision. We are continuing to negotiate."
And Mercedes team principal Ross Brawn feels Michael Schumacher could take on a management role when he retires from driving for good.
It is possible," said Brawn. "There will be a day he does stop. We are not discussing that in detail because that is not a consideration at the moment.
"But Michael's experience of motor racing, his judgment and so on, would be an asset to any team.
"I am not sure he wants a day-to-day commitment that some of us do, but he would like to stay involved, he loves the sport, he loves racing, he loves developing the cars, how the team works.
"So I can full well see in the future that he would retain a strong interest. That will come one day, and I do hope it will be with us."
With Nico Rosberg already under contract for 2013, a new deal for Schumacher would appear to lock out McLaren's Hamilton, who according to Bild is demanding EUR 25 million per year from his next employer.
But Rosberg's name has also been connected with McLaren in recent days, raising the prospect of a Schumacher-Hamilton driver lineup at Mercedes in 2013.
XIX Entertainment, Hamilton's representatives, are believed to be locked in negotiations with McLaren while having also spoken to Mercedes about the British driver.
And while Sportsmail claims McLaren are only willing to offer Hamilton a deal "worth considerably less than his existing £15million-a-year terms", Mercedes have put an offer on the table that matches his "current deal while bonuses could push the sum towards £60m over three years."
Hamilton, the report claims, is "shocked by McLaren's unwillingness to at least match his current salary."
But it's not all about the money.
Added to it Mercedes have sweetened the deal by offering Hamilton "undisputed" number one status while the 27-year-old is "excited by the prospect of working at Mercedes under Brawn."
And Mercedes engines might also be playing a big role in the whole affair.
With former works partner McLaren now needing to pay the Stuttgart manufacturer for its power units, a cartoon at motorsport-magazin.com depicted Haug telling Martin Whitmarsh: "Kein Lewis, Keine motoren" (No Lewis, no engines).
"I am not planning to retire at the moment," he said.
"I am very excited about this 2014 engine programme. I think it is quite a game-changer in F1.
"I still have a strong engineering passion, so having such a different engine and different package in 2014 is exciting and developing the team is exciting.
"For how long, who knows? But I have no interest in stopping in the near future."
Transfer Speculations from Italian GP Paddock