Yes,this type of content is part of what Google defines as automatically generated content, and this tactic is penalized. Most of the content spinners used a mad lib approach, by using synonyms, and swapping sentence and paragraphs to create crappy content (used for MFAs – made for Ad Sense – websites, or for article marketing).
“In cases where it [thin content] is intended to manipulate search rankings and not help users, Google may take actions on such content. These include, but are not limited to: […] text generated using automated synonymizing or obfuscation techniques” source
Many times, spammers didn’t want to spend time creating the original article that was later spun. They simply copied an article from the Internet and replaced words using synonyms or more advanced techniques. This is also against Google’s official guidelines:
“Some examples of scraping include […] Sites that copy content from other sites, modify it slightly (for example, by substituting synonyms or using automated techniques), and republish it” source