The plastics division, which could be valued as high as $10 billion, has been under pressure from rising commodities costs, and some Wall Street analysts had been predicting its sale. A GE spokesman declined to comment.
News of the sale process was first reported by the Wall Street Journal. The newspaper's web site said the restricted auction process appears to be a response to concerns from the Department of Justice, which is investigating a possible lack of competition among private equity buyers
GE apparently has told private equity buyers they will be subject to restrictions when it comes to joining with other private equity buyout firms, according to the source, who is familiar with the auction process. Goldman Sachs is reportedly representing GE and has also contacted potential industry bidders.
A Goldman Sachs spokesman had no comment.
In a December 13 interview with David Faber on CNBC.com, GE CEO Jeffrey Immelt acknowledged that plastics was underperforming.
"Plastics has had a difficult last 18 months with pricing and raw material inflation," he said.
Faber asked him if GE intended to sell the plastics unit.
"We will evaluate all these businesses on an annual basis ... We think we can still get good earnings growth out of plastics... With all the liquidity on the outside, now is the time we should be going through a tough consideration...not just for plastics but for all the businesses in the portfolio," Immelt said at the time.
Since Immelt took the helm of GE, the company has sold a number of low growth businesses. Last year GE sold Employers Reinsurance Corp to Swiss Re for $8.5 billion.
GE recently agreed to sell its Advanced Materials business to private equity buyer Apollo Management LP for $3.8 billion in cash and securities. GE retained a small ownership stake in the company.
Immelt has reshaped GE with acquisitions in entertainment, healthcare, security technologies, and water treatment. GE, under Immelt's leadership, bought British medical diagnostic firm Amersham PLC for $9 billion and added Universal's entertainment assets to NBC to form NBC Universal, the parent company of CNBC.