WHAT can Sir Alex Ferguson do against a apparently irresistible rival who seems to have money to burn?

What can he do when he's being told his squad is too weak and the team he's up against is too strong? The troubles currently crowding around Ferguson will be addressed by a man who is a veteran of adversity as well as triumph. He heads across Manchester on Sunday to face the noisy neighbours – and boy has their volume increased recently – in the third round of the FA Cup. What happens against Manchester City in the Etihad Stadium won't define United's season, although it could certainly strip them of one of the trophies still available. Far more significantly it could underline a sense that the balance of power in English football has moved a handful of miles across the city and that, this time, Ferguson is powerless to prevent the flow.

There is a pattern to these turbulent periods in Ferguson's career. He has survived and prospered after so many of them that criticism of him is muted and patience is generous. He has repeatedly made fools of those who have written him off, some of whom did so gleefully. Fans can always resort to a vague faith that "Fergie will sort it out" because that's how things have panned out so often.

Take the summer of 2006. Jose Mourinho had just won back-to-back Premier League titles for Chelsea and embarked on another enormous spending spree with the intention of making it three. They added Ashley Cole, John Obi Mikel, Andriy Shevchenko and Salomon Kalou to a squad which had already shown itself to be the best in the country. United were unfancied. Their only summer signing was Michael Carrick. Yet 2006/07 became another great Ferguson triumph as United won the league by six points. Humble pie was served in various locations around the country.

Ferguson has seen off Liverpool, Arsenal, Leeds United, Blackburn Rovers and Newcastle United over the years, although the Chelsea comparison is of greatest relevance to City's current challenge given that then, as now, United were financially inferior. Actually the threat from their local rivals is not necessarily any stronger than it was from Chelsea five years ago, given Mourinho had already proved himself as a manager who could deliver league titles in England (Roberto Mancini must still do so). City's annual losses were £195m in the most recent accounts and Uefa's Financial Fair Play rules will soon put a cap on their spending. In 2006, when it seemed like Roman Abramovich could pour money at any apparent weakness in his team, a limit on their spending seemed inconceivable. A London location gave them additional advantages when it came to recruiting superstars who even a club of United's scale could not attract. So Ferguson has faced this sort of challenge before.

But something significant has changed, and it gives substance to the speculation that, if he is to continue for three more seasons at United, he may do so in steady decline without adding another title. Manchester City may not be any more ominous than Chelsea were, although they are a growing force which still has enormous potential, but the real issue is how United are equipped to deal with a truly daunting rival.

When the Professional Footballers' Association selected its team of the year at the end of that 2006/07 campaign, eight of the 11 representatives were United players: Cristiano Ronaldo, Paul Scholes, Edwin van der Sar, Gary Neville, Patrice Evra, Rio Ferdinand, Nemanja Vidic and Ryan Giggs. How many United players will make it into the PFA's team at the end of this season? Maybe Phil Jones, if anyone can decide his best position. Even allowing for several significant injuries United have had too many playing in fits and starts.

A 2006 midfield including Ronaldo, Scholes and a younger Giggs has been replaced by what? Take a pick from Antonio Valencia, Anderson, Park Ji-Sung, Darren Fletcher, Nani, Carrick and a less effective Giggs. Any combination from that lot adds up to a midfield well short of world-class quality. Ferguson has said he is happy with what he has and will not make any moves to sign anyone this month, yet this is the same squad to which he attempted to add Wesley Sneijder or Samir Nasri in the summer. Luka Modric was another he fancied. None of them came. The manager can't have gone from recognising that United needed someone of that stellar quality to genuinely believing that he was happy with what he has.

United are one point better off than they were at this stage of last season yet it has been an unhappy, untidy campaign. They toppled out of the Champions League from a kind group containing Benfica, Basel and Otelul Galati. A Carling Cup place was surrendered to Crystal Palace. They have held on to City's coat-tails but not without that apocalyptic 6-1 derby defeat at Old Trafford. The back-to-back losses against Blackburn Rovers on Hogmanay and Newcastle United on Wednesday night, with three goals conceded to both of them, were unusually chaotic. Supporters couldn't figure out why the back four which started against Blackburn was Valencia, Carrick, Jones and Evra. Predictably the defeats were soon accompanied by renewed speculation about Wayne Rooney being unhappy and the player and manager's relationship deteriorating. It's only 17 months since the striker changed his mind about leaving because Ferguson convinced him United could realise his ambitions.

The Scot has just turned 70 and that personal milestone is certain to provoke more "has he still got it?" discussions. He admitted as much in his own programme notes before the Blackburn match. "I suppose inevitably Manchester United supporters are going to be asking whether a man of 70 is up to managing this great club," he wrote. "I have asked myself that, though the only answer is that proof of the pudding is in results. We have had our ups and downs in this campaign but overall the first half of the season has been as good as anything I've seen in the last 25 years."

The rhetoric had to be taken with a pinch of salt. Within hours he had described the Blackburn defeat as "a disaster" and after Newcastle he was insisting there was no need to panic because "we have the experience to cope". It is Ferguson's very worldliness which will worry him most. United could pull off a surprise and topple the holders out of the cup on Sunday although the manager is expected to play a slightly weakened side so his best team is not exposed to the risk of a psychologically damaging defeat. It's the league that matters, though. Ferguson knows a title-winning squad when he sees one. And he's just as good at recognising one which will fall short.