Good news: It doesn't work on all units... which is... bad news because, it tells us something about the code that is actually supposed to be copy and paste.
How do you mean?
As far as I'm aware, Grenadier LMG is the only LMG upgrade that applies on the squad and applies only a single weapon. Ober MG34's might do it too? Most weapon upgrades are pick ups or add 2 to the squad.
But yeah it's not so much a coding issue as it is implementation. Most of Relic's unit stuff is done via .rbf files or whatever which is edited in a GUI interface. It depends on how they implemented it there, and often times Relic copy pastes existing stuff to make new stuff. But sometimes they'll copy paste something unintuitive, like minesweepers to make LMG, which results in these sorts of oversights. They'd be better off if they made everything from scratch to purpose to be honest.