Ontario Shipyards wants to build the next generation of military corvettes, but it faces rough seas ahead

The Port Weller dry docks are a marvel to behold: two rectangular gashes in the Earth, more than 225 metres long—like laying Toronto’s TD Bank Tower on its side. The bigger of the two, 24 metres across, is as deep as a three-storey house, its walls made of pockmarked concrete and dark corrugated metal. Monstrous double doors, like the gateway to a Tolkienesque fortress, keep at bay the flat, blue-green waters of the Welland Canal on the other side.

For much of the latter half of the 20th century, this was home to one of the biggest shipyards on the Canadian side of the Great Lakes, near where the canal spills into Lake Ontario, in St. Catharines, Ont. At the shipyard’s height in the 1950s and ’60s, as many as 2,000 people worked here, welding the steel hulls of dozens of tankers and cargo ships for commercial customers.

By the early 2000s, however, the place had fallen into disrepair after a series of operators became insolvent and the North American boat-building business foundered in the face of cheaper Asian competitors. The shipyard, with its cavernous workshop hung with wrenches the size of baseball bats, was soon a shadow of its former self. Too often, its dry docks have sat empty, their sunbaked floors speckled with weeds and puddles.

But Shaun Padulo hopes this place will soon be crawling with hundreds of welders, shipwrights and engineers, building the Royal Canadian Navy’s next generation of corvette-class warships—and reviving Ontario’s shipbuilding industry in the process.

Padulo is the CEO of Ontario Shipyards Inc., which took over the long-term operating lease for the moribund dry docks in 2017. (The facility is owned by the federal government and administered by the St. Lawrence Seaway Management Corp.) His company now has about 175 workers here and at facilities in Thunder Bay and Hamilton. And it still earns much of its revenue (it’s privately held, and Padulo declines to release precise figures) fixing commercial ships forced to idle during the short winter window when ice blocks the St. Lawrence Seaway.

But in 2022, Ontario Shipyards won a $135.6-million contract for a back-to-the-studs rebuild of the Canadian Coast Guard’s CCGS Terry Fox, a 43-year-old, 88-metre icebreaker that still occupies the far end of the deeper of the two dry docks.

It’s a complex job—the largest refurbishment in coast guard history—and it was originally supposed to be completed in summer 2025. But on this sticky summer afternoon, the ship remains a dark maze of exposed metal, scaffolding and cables, as delays mixed with the expansion of the retrofit’s scope have pushed its completion back to December 2027. A garage-door-sized wedge is missing from the side of its thick hull, to allow for the eventual replacement of its four 40-tonne engines.

The Terry Fox is the start of something bigger, or so Padulo hopes. A soft-spoken 37-year-old with gold-rimmed eyeglasses, he looks and talks more like the CEO of a tech startup than a guy who once worked on tugboats and knows his way around the underside of an icebreaker. Given the odds he faces, his vision for Ontario Shipyards—in the works since he took the reins in 2018—also bears a striking resemblance to a speculative tech play.

Padulo’s bid to return these dry docks to their former glory hinges on convincing the federal government to choose his company—ideally as part of a coalition of more experienced partners—to build some or all of the Canadian navy’s next-generation corvettes. The project, once estimated at $5 billion but ultimately expected to cost much more, could involve the construction of 16 to 20 small warships for coastal defence—“small,” but at more than 100 metres, still longer than a football field.

The navy, already more than a decade into a lengthy renewal of its entire fleet, has revived the corvettes idea as the Carney government pushes to re-arm in the face of new threats posed by Russia and China, not to mention pressure from U.S. President Donald Trump, who has demanded that Canada and other NATO countries boost defence spending.

This multibillion-dollar building boom appears to have the navy moving a few knots faster than normal: Vice-Admiral Angus Topshee, vice-chief of Canada’s Defence Staff and former Commander of the Royal Canadian Navy, has said he wanted the new corvettes “last year.” So far, though, the navy has only pledged to put out a request for information to learn more about the industry’s proposals and capabilities. It could be years before the work actually starts, if at all.

That hasn’t stopped speculation about a procurement battle for the corvettes that could pit the upstart Ontario Shipyards against the country’s more established—and historically more politically convenient—players: Chantier Davie Canada, based in Lévis, across the St. Lawrence from Quebec City; Irving Shipbuilding in Halifax; and Seaspan of North Vancouver. (There are also foreign giants sniffing around.) All three of those competing Canadian sites, which employ thousands and already have massive coast guard or military ships under construction, are full-fledged members of the federal government’s multibillion-dollar National Shipbuilding Strategy, with Davie the most recently so anointed. Ontario Shipyards was left out.

But Padulo says his company, and his province, should be given a fair shot at what is, after all, meant to be a national strategy. He also suggests that his competitors are jammed with work and that getting these corvettes in the water as quickly as possible requires another untapped shipyard—namely, his.

If he succeeds, the corvettes would be the first Canadian military ships built on the Great Lakes since the Second World War. The contract, and other potential work for allied navies to follow, could help revive the St. Catharines shipyard, with jobs for at least 800 direct employees and 500 subcontractors, Padulo says, for a decade or more.

The timing would be ideal for Ontario as it stares down the potential U.S.-induced collapse of its auto industry, and the steel mills just down the road in Hamilton feel the strain of Trump’s tariffs. Padulo says that the little hamburger joint around the corner from his Port Weller shipyard—MJ’s Own Munchies—might need to staff up for a much busier lunch rush.

But not quite yet. Even he acknowledges there are rough seas ahead.

Padulo hands me a hard hat and safety vest in Ontario Shipyards’ heaved and cracked parking lot before leading me on a tour of the small portion of the building that’s now in use. This part of the office complex was renovated by the company’s own shipwrights, he says, to keep them going in low season and to save cash—and you can tell. It all has a spartan, wood-panelled below-deck feel.

He soon whisks me upstairs to “the loft,” an expanse of abandoned offices that looks more like a zombie movie set. Stalactites of wet insulation hang from what’s left of a caved-in ceiling. It’s strewn with relics of a lost age: drafting tables, one covered with old blueprints; rows of abandoned filing cabinets; a whiteboard covered with some incomprehensible military lingo. Those scribbles date back to 2012, when navy personnel were stationed here overseeing the overhaul of the now-scrapped destroyer HMCS Athabaskan. In a hallway, a panicked bird flutters by, bashing into the walls.

Nine years ago, when the company took over the lease, the entire place looked much like this deteriorating time capsule. “We walked in and were like, what are we doing?” Padulo says. “But we saw an opportunity here.”

Back downstairs, a framed photo commemorates the 226-metre Right Honourable Paul J. Martin, a Canada Steamship Lines freighter rebuilt here in 2000 and then substantially repaired at the dry docks in 2020. That repair job—which included replacing more than 100,000 kilograms of steel in the ship’s hull—saw Ontario Shipyards hire 100 people for the first time, up from about 20. “It was probably a project we shouldn’t have taken on at the time,” Padulo says. “But we did it because it was an opportunity to accelerate growth.”

So how could Padulo think he’s a contender to build a new fleet of state-of-the-art warships? A video posted online earlier this year by ship designer Vard Marine, the Canadian arm of Norway’s Vard Group, provides a clue.

It starts with ominous-sounding techno music, then a futuristic, computer-animated vessel slicing through a dark blue sea. This is “Team Vigilance,” a concept for the new “Vard 7 105 Continental Defence Corvette.” Its website-listed backers: Vard and its Italian owner, Fincantieri, one of the largest military shipbuilders in the world; the Canadian arm of French weapon-systems maker Thales Group; Denmark’s SH Defence; and Ontario Shipyards.

Derek Buxton, Vard’s Ottawa-based VP of business development—who spent 32 years with the navy and coast guard—acknowledges that the other Canadian shipyards have both a large head start and deep links to Ottawa. Plus, he says, a couple of interested international firms already have a direct line into decision makers: Germany’s ThyssenKrupp Marine Systems (TKMS), which recently won the contract to build Canada’s next generation of submarines, and Sweden’s Saab, which has been trying to sell Canada its Gripen fighter jet (if an elbows-up Ottawa drops its plans to buy more American F-35s). Other global players have also been knocking on the navy’s door.

But Buxton says Ontario Shipyards, and the more than 30 companies that make up the “loose consortium” that is Team Vigilance, have a built-in advantage: Port Weller is right in the middle of the province’s massive industrial base, meaning cut steel and other key components, as well as scarce skilled labour, can be more easily sourced locally. He says the navy has to look to another shipyard if it’s serious about getting the corvettes before the 2040s. It’s clearly in the national interest, he adds, to restore Ontario’s long-lost military shipbuilding capacity to get it done in a timely way—and the current government, with its re-armament push, appears ready to make bold moves. “The procurement system has always been afraid. It’s lacked courage, and that’s why processes take forever. You don’t want your minister to be asked a difficult question,” says Buxton. “Well, it’s clear to me that this current government has the courage to make decisions in the national interest.”

Being part of a team like this, Padulo reasoned, would help the small Canadian company “leapfrog” to the level of Davie, Irving and Seaspan—with fewer growing pains. The Team Vigilance coalition was originally unveiled in 2023, at the CANSEC global defence trade show in Ottawa, but the concept has since been upgraded from a patrol vessel to something more like the higher-capability corvettes the military has in mind.

This kind of international shipbuilding coalition wouldn’t be unheard of: The River-class destroyers being built at Irving’s shipyard in Halifax are based on a design from British defence giant BAE Systems. And Davie is owned by London-based Inocea Group, with shipyards in Finland and the U.S.

Despite the slick video, Padulo says no actual deal has been finalized—Team Vigilance was put together “from a marketing standpoint.” And he adds that he’s still on the lookout for other potential partners, such as South Korea’s massive Hanwha Ocean, with whom he’d been working as it looked for ways to ingratiate itself with Ottawa before ultimately losing its bid to build Canada’s new submarines to Germany’s TKMS in July.

He also wouldn’t rule out working with the domestic designers affiliated with other shipbuilders, noting that both Irving and Seaspan have their own engineering arms, and that the navy is keen on designing the ship in Canada.

“The decision,” Padulo says, “is going to be based on who gives us the best shot to build vessels in Ontario.”

For non-naval buffs, “corvette” is synonymous with fast cars. But the term—meaning a small, nimble war vessel—dates back to 17th-century France. The name was revived in the Second World War, as the Allies relied on these speedier ships, many of them made at Canadian shipyards on the Great Lakes, for escort duties and to hunt German U-boats. It was only in the 1950s that General Motors took the name for its new sports car.

Canada’s fleet has nothing that could be considered a corvette. The new ships are meant to replace 12 Kingston-class coastal defence vessels, which date from the 1990s. They’re barely warships at all, armed with a pair of machine guns and used to chase suspected drug smugglers.

But the country’s naval spending list is already very long: It just committed to buying a dozen of those new German subs for an estimated $24 billion, and is building batches of Arctic patrol vessels and resupply ships. Then there are those 151-metre, 8,000-tonne River-class destroyers, the first three of which are being built by Irving. The plan is to build 15 of them over 25 years at roughly $5 billion a pop.

The new corvettes, if added to this already full shopping cart, are set to be much bigger than the Kingstons, with more and better weapons, and the capability to launch the latest remote-control air, surface and underwater drones. The navy also wants them to be able to operate at speed close to Arctic ice. As Topshee told the Halifax Chronicle Herald earlier this year, the new ships are meant to “have the fight of the Halifax-class” frigates, the 135-metre workhorses of Canada’s navy, which are equipped with missiles to hit ships and aircraft, and torpedoes for submarines. (The Halifaxes are also on their way out.)

Despite the current rush, Canada’s military has been notoriously slow at buying or building planes, boats and guns. And if there’s a real military need for the ships to be built quickly, Philippe Lagassé, a professor at the Norman Paterson School of International Affairs who has advised the government on military procurement, says it might make more sense to simply buy them off the shelf from another country, rather than cooking them up from scratch at a Canadian shipyard, also just cooked up from scratch. “If you speak to international firms or other countries, they kind of shake their heads. ‘Why would you build this in Canada? Buy it off the Japanese—you’ll get it next year,’” Lagassé says. “And so it becomes another one of these issues of domestic economic development versus military capability.”

Of course, buying ready-to-wear foreign vessels would, he says, mean losing the economic (and political) benefits of doling out these contracts in Canada—and possibly attracting the scorn of taxpayers forced to foot the bill.

Padulo knows firsthand how quickly things can go from good to not-so-good on a boat.

During his teenage years, he worked as a deckhand on tugboats on the Great Lakes. One night, he and his crewmates were preparing to dock a barge at Burns Harbor, on Lake Michigan near Chicago. High winds suddenly picked up, and the captain ordered everyone to take cover as what appeared to be a tornado descended. The funnel whipped the massive mountains of coal stored on shore into a whirling dark cloud that blotted out the harbour lights and threatened to blow Padulo, then 18, into the water. “It was like one of those movies about the Great Depression, when you see the giant dust clouds coming down,” he remembers. “When you’re on a little boat, you’re always conscious of things. You never know when something could happen.”

The son of Toronto advertising titan Rick Padulo—who gave discount retailer Zellers its “The Lowest Price is the Law” slogan and created furniture seller Leon’s “Don’t Pay a Cent Event”—Padulo spent his early childhood in Toronto. But after his parents divorced, he landed in Niagara Falls, Ont., with his mom. There, she met Blair McKeil, a prominent figure in Ontario’s marine industry and then owner of Hamilton-based McKeil Marine.

Padulo attended Ridley College in St. Catharines as a day student, where he was captain of the football and rugby teams, and a regimental sergeant major in the cadet corps in his senior year. His older brother Alex was a military man, too. In 2006, at the age of 24, Alex died in a scuba-diving training accident near CFB Petawawa. Padulo was in Grade 11. The incident, he says, is part of what drove him to seek work on McKeil’s tugboats, to clear his head. Much later, it would also drive his effort to help rebuild Canada’s military capabilities.

After undergraduate studies at the University of British Columbia and McMaster University, and summers on the Great Lakes, he headed to Rotterdam to study maritime economics and logistics. He went to work for a Dutch firm, Dockwise Shipping, later acquired by Royal Boskalis, whose vessels move massive offshore oil rigs around the world.

Padulo spent time where those ships are built, at the sprawling HD Hyundai Heavy Industries shipyard in Ulsan, South Korea, which has 30,000 workers, and its own security force and bus system. Then Boskalis sent him to Houston, where many of its oil-rig customers are headquartered.

But in 2017, McKeil came calling. His business partner, Rick Heddle, had founded Heddle Shipyards in Hamilton in 1987 with just a pickup truck and a welding machine. Now, their company was looking to expand—and they wanted Padulo to be part of it. He became president and CEO in 2018. (Heddle rebranded as Ontario Shipyards in 2024.)

Padulo soon realized that if Ontario Shipyards wanted to grow, it would have to expand beyond seasonal repair work and get its hands on government shipbuilding contracts. “When I first got here, the shareholders called it delusions of grandeur—you know, let’s do all these different things,” he says. “And we were very measured, very fiscally responsible. But there was a period where I said we had to stop laying people off, because we were never going to build the team. And they said go for it.”

Padulo admits that his background in commercial shipping had left him naive about just how political things could get when your major customers are governments. Not long after he moved back to Canada, he noted that Ontario’s previous Liberal government had awarded a contract for new ferries in Eastern Ontario to a Dutch firm that would build them in Romania. (Padulo’s shop would later win a provincial contract to build a $3-million ferry.)

Worse, his company’s bid to be included in the federal government’s National Shipbuilding Strategy failed, with Davie chosen instead. Ottawa invoked a national security exception to effectively end a legal challenge Ontario Shipyards launched in 2019 before the Canadian International Trade Tribunal to argue it had been wrongfully excluded.

The company alleged Ottawa had effectively rigged the qualification criteria to unfairly favour Davie but subsequently withdrew the complaint. Padulo says the government’s choice was political but doesn’t want to relitigate it, given his biggest customer could soon be the navy.

He says the episode opened his eyes to the need for “government relations”—otherwise known as lobbying. His company hired Rubicon Strategies, the lobbying firm founded by Kory Teneycke, Ontario Premier Doug Ford’s campaign manager, to help persuade the province to back his vision. Vard Marine has also been a Rubicon client. Rubicon’s website even takes credit for the Team Vigilance concept, boasting that it “created a coalition of the willing, by the name of Vigilance, to establish an Ontario-based shipbuilder program.”

And indeed, the Ford government earmarked a $215-million pot for shipbuilding last year. Ontario Shipyards successfully applied for up to $11 million this summer. That’s on top of the $22 million the company got from Queen’s Park via the Ford government’s Skills Development Fund (SDF), which gives grants to unions and companies to subsidize worker training. Padulo says the SDF cash has been a lifeline, helping him train enough welders, shipbuilders and repair workers to keep the company growing. So far, it has trained 150 welders and other steelworkers.

But the SDF has been plagued by scandal. Ontario’s Auditor General found last year that the offices of successive labour ministers had been overriding the criteria for many SDF recipients. Political critics have charged that the government handed a disproportionate amount of the money to entities linked to Progressive Conservative donors and lobbyists, including to clients of Rubicon.

Teneycke has said he didn’t lobby the government himself and follows all ethics rules. The government has repeatedly insisted that donations didn’t influence who received funds. But Padulo’s donation record suggests he wasn’t taking any chances. According to the Elections Ontario donation database, he has given $16,099 to the PCs since 2021, including big cheques to the labour ministers in charge of the SDF and to the current transportation minister, who oversees the shipbuilding cash. Padulo says his applications for SDF cash succeeded on their own merits and notes that he’s also donated to the riding associations of local Liberal MPs who were strong advocates for the shipbuilding industry, not just the Ontario PCs. (Elections Canada records show he’s been a frequent federal Conservative donor, too.) “It’s a very political industry,” Padulo says, “so we’re supporting candidates who have come out swinging for shipbuilding in Ontario.”

There’s no question the PCs are on board with Padulo’s vision. Ford—always happy posing with workers in hard hats or alongside heavy machinery—quickly saw the potential after touring the site several years ago, Padulo says. He also stresses that Quebec has handed hundreds of millions in loans and grants to modernize Davie. This past summer, Ford publicly demanded that Ottawa give a slice of the impending military shipbuilding contracts to Ontario Shipyards.

The $11 million from Ontario will be spent trying to convince Ottawa to do just that.

Padulo’s plan is to build a ship on spec, an unusual move that he hopes will show the powers-that-be that Ontario Shipyards can compete with more established players. It won’t be a corvette but a much less expensive training and recruitment vessel, about 40 metres long, that could still take two years to build and cost as much as $50 million. The provincial money will help get his Hamilton facility ready and perhaps go toward Vard’s design costs.

Padulo hopes it could be the first of several to come from his Hamilton outpost as the navy looks to expand the number of small vessels it uses to train sailors and attract recruits. If Canada doesn’t want the prototype, he says, overseas buyers might.

In June, hundreds of workers, politicians and military brass in their dress whites celebrated a keel laying—the ceremonial start of construction of the first River-class destroyer, the future HMCS Fraser, at Irving’s shipyard in Halifax. With a shower of sparks, workers welded a commemorative coin depicting Simon Fraser, the explorer for whom the vessel is named, onto the base of the ship’s keel.

There’s a long way to go before the Fraser sets sail, sometime in the 2030s. But at the same ceremony, Irving also celebrated delivery of a sixth Arctic patrol ship. It has at least 2,400 of its own workers at the Halifax yard and hundreds of subcontractors, and it has proven its ability to deliver boats even as work moves ahead on the River-class ships, the biggest destroyers ever built in Canada.

But Padulo may not be the only one who believes Irving and the other shipyards are so busy with existing orders—including a fleet of new coast guard icebreakers—that they wouldn’t be able to build the new corvettes as fast as the navy wants them. In January, Topshee was asked about Irving’s chances for the corvette contract and appeared to suggest others have a shot: “If Irving has that capacity, I would ask them to build the River-class faster.”

Across the country in B.C., Seaspan is busy building the navy two 174-metre joint support ships, the future HMCS Protecteur and HMCS Preserver. It also has a massive polar icebreaker under way for the coast guard and is set to start on a series of smaller multipurpose icebreakers, all in a pipeline that extends into the 2030s. (While Seaspan is based in Canada, it’s owned by U.S.-based Washington Cos., founded by U.S.-born industrialist Dennis Washington, who donated US$1 million to the Trump campaign in 2020, and chaired by his son, Kyle.)

Seaspan has more than 4,000 employees attached to its North Vancouver shipyard. (It has a second in North Vancouver focused on repairing commercial ships and a third in Victoria to handle navy maintenance, including for the new subs.) Dave Hargreaves is Seaspan’s senior VP for strategy, business development and communications. The company, he says, still has ample capacity to take on the corvettes and has been discussing design concepts with the navy. But even he envisions a scenario where Ontario Shipyards or other competitors could help build some of the vessels in parallel. “We have relationships with all these yards,” Hargreaves adds. “We could see a plan where we design the corvettes in Canada, and then they are built in more than one yard. That does a couple of things: It keeps everybody busy, but it also gets the navy the fleet faster.”

Adam Lajeunesse, an associate professor at St. Francis Xavier University in Antigonish, N.S., and chair of its public policy and governance department, warns that such a plan could create headaches. The first attempt at this kind of complex ship is always the most expensive, he says, so spreading the contract around could mean the learning curve is repeated at multiple shipyards, adding to what will already be massive costs.

He suggests the navy will lean toward a tried and true partner, and here he likely means Irving, even with its queue of orders already under way. “The big lesson from history is, wherever we build these, it has to be in the same place,” Lajeunesse says. “Consistently, what Canada does is spread shipbuilds to different yards for political purposes. What you’re doing is spreading corporate knowledge. You’re not gaining the economies of scale.”

Back at the dry docks in St. Catharines, you can still find some veterans who remember its glory days. A couple of them speak with a distinct Scottish accent, having left the once-mighty Glasgow shipyards—whose long decay was exacerbated by subsidy-slashing U.K. prime minister Margaret Thatcher—to work in Canada back in the 1980s. There were once so many Scottish workers at Port Weller that locals called it Scotland Yard.

Padulo says he still hopes to get an additional and “significant” amount of money from Ontario’s shipbuilding fund to help get Port Weller back in shape. Paving alone, he adds, could run him $1 million.

But attracting workers with the right skills is more important than fixing up the shipyard itself. It has taken Padulo almost 10 years to ramp up to a team of just 175, a crew that includes tradespeople with specialized skills. And winning the multibillion-dollar corvette contract would mean growing from a small team into a large, hard-to-turn-around ship very quickly. “We’re still learning every day,” he says. “You can have the greatest shipyard in the world, but if you don’t have the people, that’s nothing.”