DETROIT – Tim Lee, the newly appointed president of international operations at General Motors Co., defends the auto maker’s decision last month to hand over a majority stake in its lucrative Chinese joint venture to partner Shanghai Automotive Industries Corp.

As part of the complex deal to set up a 50/50 JV in Hong Kong, called General Motors SAIC Investment Ltd. and aimed at expanding the export of the partners’ Chinese vehicles, the Detroit auto maker sold a 1% stake in Shanghai General Motors Co. Ltd. to SAIC for $84.5 million.

The move gave SAIC a 51% stake in Shanghai GM, one of the U.S. auto maker’s most-profitable foreign ventures, at what even Lee admits was a substantial discount given its cash contributions in recent years.

The transaction allows SAIC to consolidate Shanghai GM earnings onto its income statement, which provides potential investors with a clearer picture of SAIC’s finances.

Cash flow-back to GM goes unchanged, Lee says, with Shanghai GM continuing to contribute earnings via dividend payments. And nearly all of those dividend payments go back into Shanghai GM, rather than to Detroit, to help deepen GM’s interests in China and keep pace with future growth.

“That is the model, and it is intact as it has been forever,” Lee says of the 12-year-old JV, which served as GM’s first foray into China. Sales reporting remains the same, as well, he says. “It is absolutely unchanged.”

But the transaction benefits GM, Lee says.

In short, terms of the deal call for “other considerations,” allowing GM to set up production of small cars and mini-commercial vehicles currently built by Shanghai GM’s Wuling unit elsewhere in the world. GM owns a 34% stake in SAIC-GM-Wuling Automobile Co. Ltd.

Partner Wuling Motors Co. Ltd. produces small vans in Liuzhou, Guangxi, but even at full capacity, the plant cannot build enough vehicles to meet demand in China. Wuling vehicles are low-priced, with less than 1-ton capability and are used for a wide range of duties in emerging markets.

“We think it was a very good deal,” Lee tells journalists during a roundtable discussion at the North American International Auto Show here. “We will export, as well as ‘productionize’ the operation in various countries.

So it’s not just (Wuling exports), it is the intellectual property rights to the various products we can use in other places.”

Lee claims despite the shift in majority ownership of Shanghai GM, the U.S. auto maker remains in control of the JV through his status as chairman of the board of directors. “From an overall effectiveness, I see no difference in how the business operates,” he says. “It is a seamless transaction.”

India will be the first market where the new JV will produce and sell vehicles.