Once I got it cut out, its very apparently why it rusts, and how stupid GM is.
This section I'm holding with my thumb is what you normally see when you look in the wheelwell.

Peel that section back and you can see the black foam looking material that holds water and starts rust.



The black foam looks kinda soft, but its hard as a rock.
As far as I know, there is no real prevention technique, or a cheap fix. You have to cut out the old section, weld in a new one, and repaint.
Just thought I'd share.


















