Mine had the exact same rust spot, and it was a California car from the beginning, but I don't think it saw many car washes.

You'll need to pull that rear window. I took mine out with the frame attached (soon I am going to have to figure out how to put it back in). There are two screws along the c pillar behind the rear door. One is inside the door window frame area at the top, the other is at the bottom where the moulding you just took off is at.

I got all the rust out using a wire wheel and was left with a small hole, and some lacy metal in a couple places, I used fiberglass to make the repair because I know how to do that, and a figure at least it can never rust again.

The car has just been painted, so I'll be putting that window back in soon, if you beat me to it tell me how you did it. Oh, yeah, put tape on those clips that hold that molding on, your fingers will thank you, those suckers are sharp as a knife.

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1983 W123 300TD US spec Turbo engine, with Euro bumpers and manual climate control, and manual transmission.