Fiat SpA CEO Sergio Marchionne, who has been urging Italy to renew scrappage incentives this year, says the company will be able to cope if the government decides against an extension.

“We would fully support any decision by the Italian government not to renew them,” Marchionne says, adding that Fiat will survive “even under the most pessimistic scenario.”

Marchionne has estimated that car sales in Europe will decline by 12% if new incentives are introduced—and 16% if they are not.

But yesterday he said that extending incentives throughout Europe will merely pull ahead sales and postpone the industry’s need to confront its overcapacity.

Marchionne appears eager to avoid a confrontation with Economic Development Minister Claudio Scajola, who threatened this week to kill proposals to renew Italy’s scrappage incentive unless Fiat reverses its decision to close its assembly plant in Termini Imerese, Sicily, next year.

Toyota Motor Corp. says it is aware of a software glitch in its best-selling Prius hybrid sedan that can cause a one-second “pause” in braking. The Nikkei reports that the company will announce a recall today covering as many as 272,000 cars sold in the U.S. and Japan since last May.

Toyota said yesterday it considers the effect a “phenomenon” and not a defect. It emphasized that the Prius meets required braking performance standards even the interruption.

Government transportation agencies in Japan and the U.S. have reported more than 177 complaints about Prius brakes in the past few months. The U.S. says it is launching an investigation into the issue.

Toyota told reporters in Japan yesterday that the software glitch could cause a perceived interruption in braking when the Prius switches from regenerative braking to conventional hydraulic braking. The changeover is managed electronically by a computer control unit.

January car sales rose nearly 30% to 145,000 units in the U.K., aided by the government’s scrappage incentive that offset an increase in the VAT to 17.5% at the beginning of the month.

Sales, which compare to a weak year-earlier period, mark the U.K.’s seventh consecutive monthly sales increase. Nearly 18% of January sales involved vehicles purchased under the €2,300-per-car scrappage scheme, according to the Society of Motor Manufacturers and Traders. The incentive program ends on 31 March unless funding expires sooner.

The SMMT says all segments reported higher sales in January except for sports cars and upper medium models. Demand was strongest in the mini and supermini segments. Last month’s best-selling model was the Ford Fiesta (9,000 units), followed by the Ford Focus (7,000) and Vauxhall Corsa (5,800).

As usual, Ford was the U.K.’s leading brand with sales of 22,000 units, up 6% over the year-earlier period. Vauxhall reported sales of 16,000 units, up 3%. Volkswagen AG was third with sales of 15,000 units, up 70%.

Toyota Motor Corp. continues to expand a series of global recalls to fix flaws that could prevent the accelerator pedals from returning to idle in at least 8 million of its cars and trucks. The company says the campaigns could cost as much as €1.5 billion.

Toyota is conducting two recalls: one to replace floor mats that may jam the accelerator pedal and another to remedy a mechanical problem in the pedal linkage that also may impede the pedal.

Earlier this week Toyota extended the second campaign to include 180,000 vehicles in Latin America, Africa and the Middle East. Yesterday the company said it will recall 30,000 cars in Mexico and might launch a similar campaign in South Africa.

Toyota Motor Corp. says expects to report net income of €652 million for the fiscal year ending 31 March, reversing a stunning €3.6 billion loss in the previous 12-month period in spite of huge safety-related recalls in the current quarter.

The company predicts its consolidated annual net revenue will fall 10% to €147 billion this year on unit sales of nearly 7.2 million vehicles, down from 7.6 million last year. Toyota expects to report a full-year operating loss of €159 million.

Toyota says full-year results will be heavily influenced by an exceptionally strong October-December period, in which revenue grew 10% to €43 billion, unit sales improved 12% to 2.1 million and net income swung from a €1.3 billion year-ago loss to a €1.2 billion profit. The company says its “emergency profit improvement” program now aims to cut full-year costs by about €13 billion—up from a previous target of €10.2 billion.

Toyota’s third-quarter results were positive everywhere except in Europe, where it managed only to narrow its operating loss to €171 million from €350 million a year earlier. Year-over-year quarterly operating income in Asia jumped by two-thirds to €532 million.

The company anticipates a loss in the January-March period because of recalls involving at least 8 million vehicles. Toyota estimates the campaigns will cost €1.5 billion and cause its sales to plummet by 100,000 units.

Toyota’s net income for the nine-month period from April through December 2009 plunged 70% to €790 million. Net revenue dropped 20% to €108 billion. Global vehicle sales fell nearly 15% to 5.2 million units, while vehicle sales in Europe declined 19% to 655,000 units.

The European Central Bank maintained its benchmark interest rate at 1%, amid fears that Greece’s financial crisis could destabilize the region.

The Greek government must demonstrate how it can reduce its deficit from 12.7% of its gross domestic product to 3% by 2012, as the European Union requires.

ECB President Jean-Claude Trichet says he remains worried about high unemployment, soft consumer spending, unused factory capacity and weak investment in the eurozone. He notes that inflation remains low, easing pressure for higher interest rates.

The central bank estimated in December that the eurozone’s economy will expand by 0.8% this year and 1.2% in 2011. Analysts say growth could be less if the region’s governments cut budgets to lower deficits. They also note that the ECB is beginning to rein in the emergency lending program it launched during the recession to revive credit markets.

French parts maker Faurecia SA has agreed to acquire the German factories of Plastal Industri AB for €22 million-€33 million, depending on the final terms of the deal.

Faurecia will issue 20.9 million shares of stock to complete that deal. It will dilute PSA Peugeot Citroen’s ownership in the company to 57% from 71% currently.

Faurecia notes that the acquisition of Plastal’s six factories and research center will give it a stronger presence in Germany. The deal also strengthens Faurecia’s status as a leading European supplier of exterior components and will increase its business with Audi, BMW, Daimler, Ford and Porsche. Plastal, which is based in Weissenburg, employs 2,000 workers. Last year, the company’s sales totaled €408 million.

The acquisition is Faurecia’s second this year. In January, it announced plans to take over Emcon Technologies, a Detroit-area maker of emission-control equipment.

Despite a weak market in Germany, Daimler AG sold 72,600 Mercedes-Benz and Smart cars worldwide in January, 17% more than the year-ago period. The company predicts “significant growth” through the first quarter.

Demand for Mercedes-Benz brand vehicles plunged 18% to 9,300 units in Germany last month. But Daimler says sales in the U.S. jumped 40% to 14,700 units, enhancing Mercedes-Benz as the best-selling German luxury brand in America. In Asia, group sales of passenger vehicles surged 87% to 17,000 vehicles.

The Smart brand continued to struggle, with year-over-year sales plummeting 33% to 6,000 units in January. Smart introduces a restyled ForTwo minicar, its only model, in the third quarter.

Vauxhall’s New City Car Will Be Based on Trixx Concept

Opel/Vauxhall will go into production next year with a new city car based on the Opel Trixx concept car it showed at the Geneva auto show in 2004, according to Autocar. The magazine says an updated version will be unveiled at the Paris auto show in September.

Trixx concept

The car has been under development for several years. But work was halted last year as Opel struggled with massive financial losses and owner General Motors Co. went through bankruptcy restructuring. Autocar says the project was quickly revived when GM Europe CEO Nick Reilly took over in December.

At the time, Reilly said that Opel needed a mini, and developing one would be one of the company’s highest priorities.

Jaguar Developing an All-Electric XJ

Jaguar Land Rover is creating an extended-range, all-electric version of its new XJ sedan, reports Autocar. The British magazine says the car will have a driving range of 600 miles (965 km), average fuel economy of 57 mpg and CO₂ emissions below 120 g/km.

JLR’s production plans for the car aren’t clear. But Autocar says the powertrain might also be usable in at least some of the company’s future SUVs.

The electric XJ will be propelled by a 145-kw electric motor and lithium-ion battery. The battery can be recharged by an on-board 1.2-liter, three-cylinder gasoline generator developed by Lotus Engineering, according to the magazine. An unidentified source says the car offers excellent handling and performance because much of the weight of its electric powertrain is offset by removing the car’s conventional engine and transmission.

Researchers Unveil “Self-Healing” Polymers for Lubricants

Developers at the University of Warwick in Coventry, U.K., say they have created a self-healing polymer that could be used to extend the life of motor oil and other lubricants.

New polymer repairs itself.

Polymers are routinely used to bolster the viscosity performance of motor oil, but they gradually break down under heat and mechanical stress. The Warwick researchers say they have been able to modify methacrylate polymer, which has long and vulnerable tendrils, so it can “re-grow” its arms like a starfish by using a Diels-Alder reaction.

The research team says it is optimizing the chemistry and will turn over its work to Lubrizol, Warwick’s industrial collaborators, for further development. A technical paper on the team’s work is available online by clicking HERE or visiting http://www.rsc.org/Publishing/ChemScience/Volume/2010/02/Self-healing_polymer.asp.

Microsoft Ready to Help EVs Find the Flattest Routes

To extend driving range, electric vehicles will benefit from satellite navigation systems that help them plot the shortest routes. But for maximum distance, EVs also need to know the flattest path to their destination, says Greg Baribault, U.S. marketing director, Automotive Product Management, for Microsoft Corp.’s Windows Embedded system.

Baribault tells AutoBeat Europe that future EV navigation systems should be able to identify energy-saving flat routes or divert drivers to downhill paths where an EV can use their energy recovery systems to partly recharge the batteries.

But developing such navigation aids is challenging, because strong regional differences make it difficult to standardize the systems, Baribault cautions. One example: Roundabouts are almost nonexistent in the U.S. but common in Europe. He says navigation algorithms developed in the U.S. do a terrible job of trying to route a driver through a roundabout.

Microsoft’s focus will be to help carmakers add software to navigation systems that permit real-time information to be loaded into the car. Baribault says updating software frequently will be a priority, perhaps through a USB drive that has been updated by the driver’s home computer. He also predicts that connecting cars to a “cloud” computer network to get maps and other updates will become widespread within three years.