Approximate Density Functional calculations have been carried out on the addition of H2 to CH3(O)-CCo(CO)3 as well as the product elimination step in which CH3(O)CH and HCo(CO)3 are subsequently formed. These reactions represent the last step, e, of the catalytic hydroformylation cycle according to the mechanism proposed by Heck and Breslow. H2 was found to form stable bipyramidal η2 adducts with the coordinatively unsaturated acyl intermediate CH3(O)CCo(CO)3. The η2 adducts have in the optimized structures of lowest energy the acyl group positioned along the apical axis and the H2 molecule coordinated in the equatorial site. The adduct with H2 lying in the basal plane was found to be only 19 kJ/mol lower in energy than the corresponding complex with H2 parallel to the apical axis. The dihydride complex that results from an oxidative addition of H2 by way of the most stable η2-H2 structure was calculated to be less stable than the parent η2 adduct by 25 kJ/mol. The higher stability of the η2-H2 complex in comparison to the dihydride was attributed to the stabilization of the cobalt d orbitale by the π-accepting CO ligands. The oxidative addition reaction was investigated further by modeling the energy profile with a linear transit procedure. The profile from the linear transit revealed an activation energy ΔE* of 77 kJ/mol. The activation energy stems primarily from the stretching of the H‒H bond during the initial stages of the reaction. The total activation energy for step e along the oxidative addition/reductive elimination path was calculated to be 77 kJ/mol, with the oxidative addition being rate determining. Step e was also studied for an alternative mechanism in which the η2-H2 complex is converted to an aldehyde molecule and the catalyst HCo(CO)3 by direct hydrogen transfer from the coordinated H2 molecule to the acyl ligand. A stable intermediate in which H2 has moved toward the acyl group, thereby forming a four-center species, was found to be 83 kJ/mol higher in energy than the initial η2‒H2 compound. The corresponding reaction profile, modeled by a linear transit procedure, revealed only a minimal activation barrier. The subsequent separation of the molecular structure into the products resulted in a decrease of the energy. Both mechanisms for step e seem to be viable. On the basis of these results, the activation energy for the entire process, H2 + CH3(O)CCo(CO)3 ⟶ CH3(O)CH + HCo(CO)3, was estimated to be ~75-85 kJ/mol. This value is of the same order of magnitude as the activation energy for the oxidative addition reaction. Furthermore, it is also comparable to the activation energy of the preceding catalytic reaction step in the hydroformylation cycle, alkyl migration. © 1990, American Chemical Society. All rights reserved.