You evidently live in the Midwest or a humid climate. This area is rusting from the inside out. It wasn't rock chips that did this unfortunately or you could fix it like you envisioned. This wheel lip is where 2 panels join up and are spot welded together. One side of the metal lip of the wheel opening and the wheel house lip didn't get any primer or paint before they were spot welded together at the factory. So eventually humidity and maybe a little winter road salt caught up with it. I fixed the wheel lip and the area above the wheel lip opening on the bed (that always rusts out in humid climates) myself on my 04 Ram and 06 Dakota. Bought both of them used within the last five years. You have to do some pretty extensive metal repair/metal replacement to fix it for a long term repair or fix. Now you can just sand down and repaint the exterior of the wheel lip and that will get you by for a few years, but it's going to continue rusting from the inside out. Throwing the wheel opening guards will hide that from your sight-that's all that does. What you need to do is drill out the spot welds and pry apart this seam, then sand and or use a rust escapsulator product (I use Eastwood's and like it), then weld back up (plug weld or spot weld if you have the proper equipment). Before welding, spray a weld-through primer on the inside of both metal surfaces, especially on spots where you intend to weld the lips together. This special primer puts down a barrier at each spot weld. The primer re-melts around the spot weld after it is heated up from the weld and seals the area. Welding will burn and ruin regular paint and primer and make it ineffective. You can buy the weld through primer in a can from several sources, including local auto parts and paint stores. Good luck. This a proper panel repair of the area without replacing the whole bed side and wheel housing. At least it has worked for me. The Dakota is still looking good without a guard after being repaired three years. No bubbling or popping. I don't have a mig or tig, so my repairs were brazed with brass. It's an older metal weld repair method, but it works if done properly and is fine for just a panel repair. You just have to control heat warpage on flat surfaces. A Mig setup runs about $400-$500 with shielding gas if you don't have one. Otherwise its going to cost a couple of thousand to have a shop do it for you. Good luck! The truck in my picture on the left is a Maxwell, taken a century ago! FYI
