Weekly Der Stern said in an advance release that chairman Juergen Schrempp was exploring the politically controversial move out of the southern German headquarters in Stuttgart to shore up the stock -- which rallied on the report.

At 1058 GMT, DaimlerChrysler shares were up 3.10 per cent at 67.95 euros, while most European car stocks were flat or lower.

DaimlerChrysler, Germany's largest industrial company, declined to comment on the report, which was viewed with some scepticism by analysts.

But Schrempp is clearly concerned about the slide in the stock, which has lost a third of its value since April and was buffeted last week by a management board shakeup in which the second-highest-ranking Chrysler member lost his seat.

Part of the share's weakness reflects DaimlerChrysler's failure to retain the old Chrysler slot in the S&P 500-share index because the new group was not based in the US.

``There's a large number of US institutions which only buys S&P 500 stocks,'' said Merrill Lynch analyst Stephen Reitman.

The number of US Investors holding DaimlerChrysler shares has dropped from about 44 per cent at the time of the $42 billion merger last November to well below 25 per cent now, he estimates.

Deutsche Bank analyst Christian Breitsprecher said there might be other advantages to moving the company to Chrysler's base in the Detroit suburb of Auburn Hills.

``The management would be closer to the US business, they would get better control of Chrysler, and Chrysler may feel better integrated into the Daimler business,'' he said.

But he said he did not believe the Stern report because a move would stir up too much unhappiness among former Daimler-Benz staff who would feel relegated to second place. He also said a move might have huge tax disadvantages.

Analysts say DaimlerChrysler might have to expose reserves in the process, re-calculate valuations which are currently advantageous and lose benefits from loss carryforwards. In any event, its profits would be taxed where they were made.

``There were good reasons why it remained a German-domiciled company -- it's a big political issue. They're the largest company in Germany and one of the largest in Europe,'' said Reitman.

The stately Mercedes cars symbolise Germany's technological prowess and the famous three-pointed star is one of the most prominent landmarks in Stuttgart, a prosperous town in the conservative southern state of Baden-Wuerttemberg.

Moving the headquarters to Detroit might attract US investors, but analysts say it does not address other issues weighing on the stock -- the risky move into the competitive small-car segment and the industry outlook.

The innovative two-seater Smart failed to meet initial sales expectations and is not expected to make money for years.

Last week's board shakeup and the departure of North American President Thomas Stallkamp raised concerns about the loss of Chrysler expertise in low-cost production techniques.

``What's weighing on the stock is fears about next year,'' said Reitman, adding that the Chrysler contribution to results might drop if the US market comes off its peak.