Hopefully you found it in time and it hasn`t rusted all the way through.
you will need to remove the fender to do the job.
I have used Jasco paint stripper to soften up the rubber under coating MB used. then you will be able to cut through it to get back to good metal. you need to see how far under the coating the rust has gone.
I use POR products, and would wash it all down with their Marine Clean to degrease everything.
Then once you have the undeseal and paint removed, treat it with their Metal Ready. It etches new metal and will disolve the rust given enough time.
when you have it all prepared, then coat it with their POR paint. just follow the directions.
that area behind the fender and splash shield it a breeding ground for rust. it never gets looked at by the majority of owners, but us a breeding ground for rust. It should be washed out every year.
Just about every 123 I have looked at in this area, my own and one`s at PNP. all seem to have this problem. seem MB didn`t address this area from the start when the cars were built. In most cases it looks like the wall area didn`t have much more than a coat of primer on it.
That area under the Battery tray area can really be a nightmare to fix. there are several body panels that come together there. plus the hinge pocket drain etc.... get neglected and will rust through.
My 85 has this problem from the battery. and rusted through into the cabin. didn`t know i had a problem until I was scrapping around and the screwdriver went through the sheet metal.
After I treated it and painted the POR, i used their thin fiberglass matting soaked with the paint to seal and bridge the areas. then used their seam sealer to fill the voids and smooth it all off.
Charlie