Heater maintenance

Looking for some input here. My hot water unit started blowing BLACK smoke and had flame coming out of the exhaust vent. I shut it down, removed the cover and found that part of the metal plate that overlaps the coils and extends to the back of the chamber has basically disintegrated. The metal has flaked off leaving about a 4" gap with nothing between the heat source and the insulation above it. The metal literally flakes off in my hand.
Any way, I cleaned the coils, vacuumed out all of the metal debris, and while it doesn’t smoke as badly, it is still way more than normal. The unit is only 10 months old.

Questions: What’s causing the smoke?
What caused the metal to do that?