A real options model for closing or not closing a production plant

The closing/not closing decisions for a production plant normally worries senior management as their decision will be scrutinized and criticized by many groups of influential actors. The shareholders will react negatively if they find out that share value will decrease (closing a profitable plant, closing a plant which may turn profitable, or not closing a plant which is not profitable, or which may turn unprofitable) and the trade unions, local and regional politicians, the press etc will always react negatively to a decision to close a plant almost regardless of the reasons. Real options models will support decision making in which senior managers search for the best way to act and the best time to act. The key elements of the closing/not closing decision may be known only partially and/or only in imprecise terms, which are why we show that meaningful support, can be given with a fuzzy real options model. The decision process and its consequences are worked out in terms of a real case in the forest products industry in which we have been able to show the models with realistic data.