As well as stating that Versus is still in production, the executive said he'd just come back from a periodic meeting and had seen the title in action. He teased fans by saying that the quality of the game's cityscape environment could make one lose their footing.
It seemed a little extreme for Square to just drop everything after spending so long on the game. That said, so far out from Final Fantasy XIII's release, it wouldn't surprise me if that particular tie gets severed before the game comes out.
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destructoid's previous coverage: Final Fantasy Versus XIII