OK...let's look at this overall.
Work done ON the car is net force times distance. Net force is (driving force - friction force). So work done ON the car is (driving force - friction force)*distance.
But the work done ON the car is the work done by the engine, so your friend seems right. Even though I don't have the exam with me.
Negative work is possible. Technically, work is a dot product between the force and displacement vectors for a constant force. So if the force vector is directly antiparallel to the displacement, the work done is negative. Makes sense; if you're moving up, and there is a force pushing down on you, your kinetic energy is going to drop. Work just means change in kinetic energy; positive work means more kinetic energy, negative work means lower kinetic energy.