Hot rodders fixed that by stuffing big engines in those small cars ! !LOLNo.
Frictional losses are not a function of layout, they are a function of how the parts are designed. For example, the viscosity of the lube in the final drive probably has more effect on lost HP than the drivetrain layout. Modern cars are designed to minimize internal friction and power loss primarily to improve performance on the CAFE mileage test. This is why even manual transmissions today use ATF instead of 90 weight gear oil. The "compact" FWD layout was done more for packaging than efficiency. By making the drivetrain more compact, the whole car gets smaller and lighter for the same internal passenger volume. Body structure weighs less, so suspension can be lighter, brakes can be lighter, and thus a smaller, more efficient engine can provide equivalent performance. Sir Alec Issigonis demonstrated this with the original Mini.