Ole Gunnar Solskjaer admitted that Manchester United have "a mountain to climb" after being beaten 3-1 by neighbours Manchester City in the Carabao Cup semi-final first leg at Old Trafford.
The visitors took command of the tie in a clinical first-half with goals from Bernardo Silva, Riyad Mahrez and an Andreas Pereira own goal before Marcus Rashford gave United some hope with a late counter.
"From 15 minutes to half-time was the worst we have played this season," said the Norwegian.
"We couldn't cope with the set-back. Now we have a steep mountain to climb.
"From their first goal, and especially the second, we struggled to get to grips with them. A good reaction second-half, but first-half until they scored it was back and forth."
There were a surprising number of empty seats at Old Trafford for a semi-final, let alone for a Manchester derby.
A congested festive period coupled, a competition that has failed to catch the imagination of the fans in recent times and the knowledge that the tie would not be settled there and then all played their part.
Despite this, both clubs fielded strong line-ups though injuries meant that Rashford wore the captain's armband for United for the first time while City choose to leave both Sergio Aguero and Gabriel Jesus on the bench.
City need not have worried about the lack of a recognised striker as they tore United to shreds in a one-sided first half.
They drew first blood in 17 minutes with a Bernardo wonder strike from 25 yards that sailed in off the underside of the crossbar.
It could have been two moments later but Raheem Sterling fired straight at Victor Lindelof with the goal at his mercy.
They did double their lead with Bernardo pouncing on a loose ball before picking out Mahrez who rounded David de Gea before calmly slotting home.
City were now carving their hosts open at will and a third came before the break when a Kevin Dr Bruyne shot rebounded off De Gea and deflected off the unfortunate Periera into the net.
Solskjaer replaced the ineffectual Jesse Lingard with Nemanja Matic and the switch blunted some of City attacking prowess.
Rashford reduced the arrears with 20 minutes remaining after racing on to a Mason Greenwood pass to give the Red Devils at least some hope for the second leg on Wednesday 27 January.
City boss Pep Guardiola was delighted to hold such an advantage but warned of a United backlash in the second leg. United won at the Etihad 2-1 in the Premier League recently and have a much better record there than they do at Old Trafford during the Spaniard's tenure
"It is not over," said Guardiola. "We have one more game and we'll see what happens.
"Of course, Manchester United can come back. Last year here they lost to Paris St-Germain and qualified [in the Champions League]. They have the shirt which means history and pride."
By Russell Stoddart
Images: Getty Images