GM, in a response filed in the U.S. District Court for the Eastern District of Michigan, said the automaker had the legal right to approve Saab's transaction with China's Zhejiang Youngman Lotus Automobile Co.

"The nub of plaintiffs' complaint is that GM declined to approve the transaction plaintiffs proposed to enter into with Youngman," GM said in the filings. "But the relevant contracts did not permit Saab to consummate the proposed transaction without GM's approval."

GM had previously said the lawsuit -- filed last month by Saab parent Spyker(SPYKR.AS) -- was without merit.

Saab, one of Sweden's best-known brands, stopped production in May 2011 when it could no longer pay suppliers and employees. It went bust in December, less than two years after GM sold it to Dutch sportscar maker Spyker.

GM's efforts to kill any sale were made to eliminate a potential rival in China, Spyker had said in the lawsuit.

Spyker Chief Executive Victor Muller said at the time that GM "had it coming" with regard to the lawsuit. Spyker is seeking at least $3 billion in compensatory damages, as well as interest and punitive damages, and legal fees.

For months, Muller tried to pull off a rescue deal with various Russian, Middle Eastern and Chinese investors, Youngman and Pang Da Automobile Trade Co Ltd (601258.SS).

The lawsuit is being funded by an anonymous third party, who will share in any settlement, Muller has said.

Youngman previously declined to comment about whether it was involved with the lawsuit, while Pang Da said it was not.

GM, which operates in China in a partnership with state-run automaker SAIC Motor Corp Ltd (600104.SS), late last year effectively blocked deals with Pang Da and Youngman, Spyker said.

GM said it would stop supplying vehicles and technology to Saab's new owners because it would run counter to the interests of its own shareholders.

Spyker charged GM with interfering in a prospective deal with the Chinese companies by claiming it would no longer license its technology to or build cars for Saab even though the last agreement was structured to exclude the U.S. automaker's intellectual property, according to the lawsuit.

Saab had created its own vehicle platform that did not use any GM technology, so GM's statements that it would not support a deal were "intentionally false" because such support was not needed, Spyker said in the lawsuit.

In its response on Friday, GM dismissed the idea that its technology would not be shared with the other investors under the proposed Spyker deal.

"Putting aside whether this argument is factually wrong, it misses the point," GM said, adding that it had the right to terminate its technology license and supply agreements with Saab if there was a change in control of Saab with GM's prior consent.

"This right was clear and absolute, and did not depend on how GM's technology purportedly was being handled," GM said.

GM bought half of Saab -- which had been making cars since 1947 and built a small, loyal following -- in 1990 and the rest 10 years later. It decided to sell the brand in 2009 after the financial crisis and came close to closing it before Swedish Automobile, then called Spyker Cars, bought Saab in January 2010.

Despite its well-known name, Saab was a niche player whose future had been questioned by analysts. Saab was profitable in only one of the 19 years GM owned it, executives with the Detroit automaker have said.

A consortium called National Electric Vehicle Sweden AB (NEVS) earlier this month closed a deal to buy most of Saab's assets for an undisclosed sum. NEVS plans to build electric cars for the Chinese market based on the Saab vehicle platforms, starting in about 18 months.

(Reporting By Ben Klayman in Detroit; editing by Carol Bishopric)

• A Permanent Economic Emergency