Highlights - European GP qualifying
Mercedes F1 boss Ross Brawn admitted his team need to work out what has gone wrong after they slumped to their worst qualifying performance of the season.
Nico Rosberg and Michael Schumacher qualified 12th and 15th for the European Grand Prix, where the team were expecting an upturn in form.
Brawn said: "We need to reflect, assess and see what our next steps should be.
"We are pushing very hard to develop the car and sometimes in pushing so hard, you trip over."
Mercedes - who won both titles last season in their former guise as Brawn - arrived in Valencia for this weekend's race with a major aerodynamic development for their car, which they hoped would bring them closer to the front-runners.
Mercedes 'not good enough' - Brawn
Instead, the team failed to get either car into the top-10 qualifying shoot-out for the first time this year.
And Brawn, who came into the race
insisting that Mercedes still had a chance of winning the title
this season, was forced to admit the team were struggling.
"We've not done a good enough job this year," he said, "and whether the focus on last year's championship took a little bit of edge of what we've produced this year is possible.
"We know where we're going now and have more stability. Things are much more positive now that things are in place and we can really work on the future, but we're a bit disappointed at the moment."
Schumacher blames tyres for poor qualifying
Brawn revealed that the revised exhaust system had been overheating the rear of the car so they had had to adjust it, reducing the benefit.
"We had some issues with the package which meant we lost some of the performance over Friday and Saturday," he said.
"We had some temperatures issues with the exhaust so we had to go back a little bit on some of the things we did which hasn't helped.
"The components were overheating so we had to change some of them and increase the insulation which hasn't helped.
"It's a challenge everyone faces when you can't test - you have to test on a Friday at the track. We think we're on top of it now but it's not helped the performance.
"We made some changes here but they don't seem to be significant and we'll see if we can take some directions to find this time."
There was just no more performance to get out of the car
Mercedes driver Nico Rosberg
And Brawn said the team are having difficulty in getting the most out of their tyres, adding: "We had similar issues to Montreal in how we used the tyres.
"When we get to that final stage when they have to find the performance on new tyres we struggled.
"We were again quick in the race in Montreal and poor in qualifying so we've got this conundrum on trying to use the tyres on one lap or short runs, we're not getting the car to work properly yet."
Rosberg added: "It's very frustrating to be so far back on the grid although my lap was good.
"There was just no more performance to get out of the car. We had a few issues this morning so we had to make a compromise on our upgrade package and that made the difference of being in the top 10.
"It's not easy to understand what happened as we hoped to take a step forward here but we haven't got the best of our updates yet and we need to understand the tyres quickly.
Michael Schumacher would admit he's not where he wants to be - we're seeing signs of progress in some races but not in others
"I was quite confident yesterday so it's a surprise for me to see where we are and be beaten by even Williams and Toro Rosso - that's a big surprise and I didn't see that coming.
"But we weren't aware yesterday how big this tyre issue was for us this weekend, we failed to see that a little bit.
"I think the tyre issue is masking things for us at the moment and I don't think it would be fair to say that we have (slipped back). We need to wait a few more races to see if we can get on top of things and see where we are."
Schumacher, in another disappointing weekend for the seven-time world champion, was more than 0.6 seconds slower than his team-mate.
"There were two factors," said the 41-year-old German, who returned to F1 this season after three years in retirement.
"We had a general issue with the tyres working as in Canada. I had difficulties with the brakes, I was locking up the front right permanently. I don't understand that and we need to get on top of that.
"I am sure there are some disappointments but we are fighters, we know the business long enough. We have these up-and-down moments.
"When we had the fuel in the car we look strong but it does not help when we qualify where we do."
Schumacher's performances are coming under increasing scrutiny but Brawn again defended his driver.
"Michael Schumacher would admit he's not where he wants to be," Brawn said.
"We're seeing signs of progress in some races but not in others, but we've not had a great car this year, which has not helped him."