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A emergency exit sign is pictured above a logo of German car manufacturer Daimler AG, before the annual news conference in Stuttgart Feb 18, 2010.?[Photo / Agencies]

GRANADA, Spain?- Germany's luxury auto maker Daimler?will pursue deeper cost cuts than an initially targeted 2 billion euro in savings by 2014 as a way to raise profits at its Mercedes car division, Chief Executive Dieter Zetsche said on Tuesday.

The cost cut effort will help Daimler reach an average annual return on sales of 10 percent for its Mercedes-Benz Cars division in the medium term, Zetsche said at a presentation of the Mercedes-Benz compact Sports utility vehicle, the GLA.

The rise in sales of lower-margin compact cars like the A-Class and B-Class vehicles make additional costs cuts necessary to ensure the Stuttgart-based auto maker can reach its profit goal, Zetsche said.

true Separately, Zetsche reiterated the auto maker was on the lookout for a new factory to build small cars.

"We are thinking about an additional factory, which in all likelihood will not be in Germany," Zetsche said.

Last month Zetsche said the Germany-based auto maker may build another factory in North America as a way to ramp up global production capacity for compact cars.