I had a small amount of flaking just on the lip of the "axle" area. I was still under warranty so I showed the dealer. He took pictures and notified BMW NA. Haven't heard a thing since. That was this summer. On the positive side it hasn't gotten worse. Yours looks pretty bad. Don't know if you're still in warranty, but it might be worth taking it to the dealer (if you haven't all ready) and at least make them aware of the condition. Maybe it's another one of those "GS things".