The England striker, 23, came through United's famed youth system but joined the Gunners for £16m on deadline day.
United brought striker Radamel Falcao on a £6m loan deal from Monaco, their sixth signing of the transfer window.
"They have probably lost the way of Manchester United a little bit," Phelan told BBC Sport.
"Now, rather than produce, it may be the case where they are buying in."
He added: "Someone like a Danny Welbeck has been part of United's identity and that has been broken.
"What will happen in the future now, nobody knows but that thread has been broken now."
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