The war years of the 1940's lead PBI into the production of military vessels for the United States Navy and Army. By this time, Fred's sons, Bob and Ellsworth, were involved in the business. PBI maintained a heavy wartime production schedule which included seventeen 110' wooden hull subchasers, twelve 40' motor launches, and eight 85' aircraft rescue vessels.

Following the war, PBI returned to pleasure craft, constructing wooden hull sailboats ranging from 27' to 65'. It was during this period that Fred Peterson designed and constructed the 65' schooner Utopia, a unique wood and steel hulled vessel, which he sailed around the world to publicize PBI's unique capabilities.