A powder metal component is made of compacted and sintered powder metal particles such as chromium-containing ferrous-based metal and is porous. Following sintering, the pores are impregnated with relatively smaller particles of ceria and/or yttria. The component is then heat treated and the presence of the impregnated ceria and/or yttria serve as nucleation sites for the formation of desirable oxides, such as chromium oxide, on the surface. The impregnated particles that lie below the protective oxide layer remain available throughout the life of the component in the event the original oxide layer becomes worn or damaged, wherein a renewed protective oxide is formed in such regions due to the presence of the impregnated particles.