Penny is Pietro's creation designed for a project approved by General Ironwood. He loves and cares for Penny deeply as his own daughter.
In ”The Greatest Kingdom”, Pietro reveals that his daughter had told him all about her time with Team RWBY, and explains to Ruby and the others that he rebuilt her after her core was recovered in Amity Arena Colosseum after making its way back to Atlas after the Fall of Beacon.
In "Worst Case Scenario" it was revealed that Pietro created Penny as the next breakthrough in defense technology since he wanted a protector with a soul. Therefore to create Penny's Aura, he gave her part of his own, and to rebuild her takes more from him. Fearing that if the people would have Penny destroyed after her framing, he would be unable to bring her back.
In “The Enemy of Trust“, Pietro seems to be proud of Penny for making the right choice not to side with Ironwood.
As Team RWBY are among the very first friends his daughter ever made, Pietro is shown to be very fond, delighted and grateful to the four girls for being his daughter's friends. And seems to have developed good opinion of the girls due to Penny having excitedly told him about them and her relationship with them during her time in Vale and Beacon Academy and when actually meeting them during the events of "The Greatest Kingdom" and not initially recognizing the girls, Pietro "felt like such a dunce" for not having recognized them immediately due to how highly Penny thinks of them.
During the events of Volume 4, Pietro was commissioned by James Ironwood to build Yang a prosthetic cybernetic arm to replace the one she lost during the Fall of Beacon battling Adam Taurus hinting that he wanted to assist the young woman after her trauma during the Fall and later upon officially meeting Yang in "The Greatest Kingdom" he expressed surprise at Yang for having painted it.
Later upon Penny's framing for the massacre of Robyn Hill's victory rally, Pietro was shown to have become comfortable and trusting enough to Weiss and Ruby the truth regarding his and Penny's respective condition and was comforted in knowing that the two girls would protect his daughter no matter what.
During the events of "With Friends Like These", Pietro was genuinely surprised at the Team's abilities and strength upon seeing them defeat the Ace Operatives, but nonetheless agreed with them on their stand against Ironwood's extreme plan of self preservation and assisted the girls by helping reactivate the communication on their Scrolls.
Later upon their escape from Atlas in "The Enemy of Trust", Pietro was shown to have further warmed up to Ruby and Weiss upon seeing them comfort Penny and reassuring her of her choice to not assist the General on his plan to use the Relic of Creation to abandon Mantle, clearly delighted to know how strong and genuinely true, their friendships with his daughter are.
Ironwood was the one who helped him build Penny. In "The Greatest Kingdom", he seems to be concerned for Ironwood's current psychological condition after the Fall of Beacon and having taken note of his current emotional disposition of paranoia towards not only the other Kingdoms but towards his fellow countrymen of Atlas.
In ”The Enemy of Trust”, he decides to betray Ironwood and help Ruby and the others to escape Atlas.
There has not been much interaction between them, but Pietro was the one who built Maria's prosthetic eyes after she lost her real eyes . In "The Greatest Kingdom", when she visits Pietro at his clinic, he memory of her was fuzzy until she reminded him. It was then revealed that the two are close friends with each other, as seen where Maria assisted and cared for Pietro in his weakened sickly state and was visibly shocked and worried for him when she realized that Pietro's failing health was the result of his Aura being divided between himself and Penny and later she comforted him when he began to voice concern over what would happen to himself and Penny if she was destroyed again.
In "As Above, So Below", during the mass riot in Mantle when its heating grid suddenly shut down, Maria attempted to bring Pietro inside into his clinic when the riot began becoming increasingly violent and uncontrollable and later showed a look of horror and fear as Mantle citizens began brutalizing Atlesian Knight-200s and showed clear panic together with her as the Grimm alarms sounded.
Not much interaction has occurred between them on screen yet, but there is implication that he used to be close to Watts. In “Worst Case Scenario”, he covers up Watts when he shows an old photo to Ruby, Weiss and Maria. It is hinted his relationship with Watts before the latter's apparent death was strained.
In "Gravity", Watts himself is bitter towards Pietro, for being chosen by James Ironwood over him, calling Pietro "fat imbecile" out of spite.