Rumours of the DDG-1000's demise appear not to have been exaggerated; Defense News is now reporting that the Navy will ask that procurement of the remarkably expensive stealth destroyer be limited to two (down from initial plans for 32). Instead, the Navy will pursue the construction of additional DDG-51 (Arleigh Burke) class destroyers. DDG-51s have the advantage of being relatively inexpensive, practice tested (and thus unlikely to roll over in heavy seas), and capable of supporting a ballistic missile defense system, which the DDG-1000 is not.
Galrahn at Information Dissemination has a very detailed discussion of the debate between the DDG-1000 and the DDG-51. He also makes the point that the DDG-1000 has some powerful friends in Congress:
The DDG-1000 is such a massively expensive and complicated system that it is a fair bet some portion of the system development is taking place in Hawaii. Indeed virtually every state likely has an economic interest in the DDG-1000, and with many of the subcontractors of the DDG-51 no longer with a personal interest, politicians find themselves in a difficult position. They can either support a sea change in the Navy's current course, a decision absent the support of any specific constituency, or support the current course which has the side effect of supporting some specific local voting constituency.In other words, there's still plenty of money to be shared on DDG-1000 development, while the DDG-51 process is pretty much played out. As we know from the Boeing-Airbus tanker kerfuffle, final decisions on procurement aren't really final. Still, it would be mildly surprising (although enormously disappointing) if Congress decided to save an incredibly expensive ship that the Navy no longer wanted.
--Robert Farley